Shifting the Balance: BRICS, the Dollar, and the Future of Gold

MIKE BARNES 0:20

Welcome to America’s Gold Authority Podcast. My name is Mike Barnes. Today we’re talking about the acronym BRICS. Brazil, Russia, India, China, South Africa. They and other nations met in New Delhi and agreed to building with resilience, innovation, cooperation, and sustainability. Another BRIC. Let’s talk about that with our guest, Ed Moy, 38th Director of the United States Mint, senior IRA strategist for U.S. Money Reserve. And Ed, the critics say that this is a short-term diplomatic victory. Long-term questions, though. What do you think about this BRICS meeting in New Delhi?

ED MOY 0:58

Well, I think you need to take a look at why BRICS exists to begin with. And it’s basically a number of countries who are united around the idea that the United States and Western civilization have been dominant for too long. And these countries have grown to the point where they want a seat at the table. So they’re pushing for a multipolar world, which, in plain terms, is in the past, if you take a look at a tent, there used to be two big tent poles that held up the world, the United States and Russia. Russia is now secondary to the United States, and they don’t like a single pole having that much influence in the world when China and Russia and Saudi Arabia are saying, hey, listen, we’re not chopped liver. We need to have a greater say in world affairs. And that’s is how BRICS came together with originally four countries. South Africa came a little bit later, but now it’s grown to 11 countries, and it covers about 40% of the world’s GDP. So it’s uh forced to pay attention to.

MIKE BARNES 2:18

I think the thing that’s very strange, worrisome, I don’t know what word you want to use, but BRICS controls 70% of the global gold reserves. Yeah. That’s a lot of gold out there.

ED MOY 2:29

Yeah, and it’s not surprising that uh the central banks, the government banks of all the BRICS countries, um are buying gold at a record pace. So that’s one of the things that has influenced gold prices lately, is while uh world demand can go up and down among retail buyers, uh, like people who buy the American uh gold eagles, when a central bank uh makes a play, they’re not buying one ounce gold coins. They’re buying 400-ounce gold bars and they’re buying tons of it. And so uh their interest in uh not only controlling uh the gold supply, but also buying a big portion of it uh and putting it in their bank vaults uh really has an impact all over the world, including the United States.

MIKE BARNES 3:22

It just seems like those of us like you and me who have gold in our IRAs need to pay attention to bricks because what BRICS does will influence what happens to gold in the future.

ED MOY 3:32

Yeah. And BRICS is only going to be uh buying more and more gold because one of the stated goals of uh what was agreed to a few weeks ago uh when they met was uh they’re going to uh reduce the friction of trades with each other. So uh when they buy and sell goods among uh the BRICS countries, they want to bring down those barriers. And one way to do that is use less US dollars to do it. Uh countries when they trade, uh 90% of all the foreign exchange out there involves dollars. And that’s because since World War II, the US dollar has been the world’s reserve currency. It was mainly because uh after World War II, everyone looked at each other and said, uh, we printed way too much money to fund uh this global war. Uh we can’t go back to the gold standard. And what was agreed to was uh the United States would go to a gold standard, meaning they would back their currency, uh the US dollar with gold, and other countries would back their currency on the US dollar. And they did that because they needed to buy uh U.S. goods and services to rebuild their country. Fast forward to today, everyone’s rebuilt their country. And they’re saying, well, why does the United States still have so much influence because we have to use the dollar? Let’s start using the dollar less and let’s start using our currencies more, especially with trade among the BRICS countries.

MIKE BARNES 5:15

I like the term that they use for that. Dollarization. Yeah. What does de-dollarization mean for the country and what does it mean for gold in the future?

ED MOY 5:25

That’s a really good question, Mike. Uh, you’ll hear the term de-dollarization a lot more going into the future. Russia doesn’t like using the dollar because then it’s easy for the United States to put sanctions on them, which hurt their economy, and because they’re so dollar dependent, they can’t get access to their dollars that are stored in banks all over the world. Other countries, uh, like India, are saying, well, you know, we do a lot of trade with Africa. Uh, why do we need to trade a rupee for a dollar and then use that dollar to pay um an African country for their trade, and then they have to trade that dollar back in in order to get it back into their currency. Why don’t we just trade the rupee for whatever African uh currency there is? That makes a lot of sense. Uh, but what that means is if uh people use less dollars in trade, that means that uh the dollar is less in demand, which means our borrowing costs will go up uh when we fund our deficit. And those interest rates uh reduce the value of the dollar as well as increase inflation in our own country. So that that’s where the ultimate impact of this is, and that and uh inflation uh affects gold prices. So uh, because you know, gold is denominated in dollars, although if you give it up to bricks, uh they hope that gold is no longer denominated strictly in dollars.

MIKE BARNES 7:03

It’s a very strange give and take. You you want what’s best for everyone, but sometimes what’s best for us personally is not what’s best for the United States for the economy.

ED MOY 7:13

Yeah, and uh that in the future uh is going to be a more and more uh conflict about the choices that our country has as far as the right economic policies.

MIKE BARNES 7:26

I saw that they said that gold is the new world disorder insurance.

ED MOY 7:31

Why do they call it insurance? One way that that is insurance, Russia is buying a lot of gold. And that’s because when the United States puts sanctions on them, preventing them from accessing US dollars that they have stored, you know, their dollars stored in banks all over the world, uh, it really hurts their economy. The reason why gold works for Russia is gold is basically a global currency uh that can be traded outside uh the normal financial system. And so when you bring that idea to people who own gold in a future where the dollar will be more and more challenged, where a number of countries who uh view trade with the United States with suspicion, uh you’re gonna get a lot of uncertainty. And what gold ends up being is uh you’re not solely dependent on the dollar or stocks or bonds or cash anymore, uh, but you have something that is a store of value that is widely recognized uh by many parties, and that’s why uh gold is viewed as uh part of a diversified portfolio and a safe asset in times that are going to be uncertain, which is probably uh the near and mid-future.

MIKE BARNES 9:09

You hear stuff like that, and when you hear people say that in the 2030s, which is not too far away, the gold is going to hit $10,000 and even more, is very believable because gold is so important to so many different countries, especially for the countries that we’re talking about.

ED MOY 9:25

Yeah, and it’s just not um some of the insiders that uh understand these global economics. It’s uh investment banks uh coming out with reports saying, Oh, we think uh gold minimum 5,000, we think it could go to $7,000, $8,000, $10,000 by uh 2030, 2035. Uh so it’s just not a small group of people who really like gold. It this is becoming um uh widely accepted that there’s a limited supply of gold. The uh demand for gold continues to increase at a pace that uh outpaces the supply of gold. Simple supply and demand says it’s gonna start pushing prices up much farther than they are today.

MIKE BARNES 10:14

It sounds to me like the next time the BRICS nations meet, I need to really pay attention because it affects the gold that I have in my IRA account.

ED MOY 10:24

Yeah. So uh this was the 18th meeting of BRICS. Uh it was important uh because both um uh China’s president Xi, uh Russia’s president Putin was there, India’s president uh Modi was there, so all the key leaders, and they forged a uh what they call the uh New Delhi um agreement, which uh was pretty much their coming out party. So if you view this as a person, they just had their 18th birthday and they’re declaring themselves, we’re through adolescence and uh you know, we’re a young adult now, and we’re gonna start stretching our muscles. Future BRICS meetings are going to um uh see greater influence of BRICS on not only the world stage, but influencing the rules that govern the world stage. BRICS has expanded beyond its original five uh to include now 11 countries, and you know, just think of these other countries, as diverse as uh United Arab Emirates and Saudi Arabia, but also Iran. So the interesting thing about that point is uh because of the Iraq uh US-Iraq war, uh Iran supports Iraq, Saudi Arabia and uh United Arab Emirates do not. Yet they are in the same BRICS coalition, and uh the victory for all uh of BRICS was being able to uh have unanimous agreement on a diplomatic statement, uh, which kind of shows that these countries are starting to put their differences aside and starting to work together, which means efforts like de dollarization uh could gain more momentum in the near future.

MIKE BARNES 12:25

And again, that diplomatic statement started with the word building. I know that has to do with the acronym and BRICS, but still building for the future, I think, is good for all of us.

ED MOY 12:35

From one perspective, uh these nations, particularly in the South, uh have a point. Uh they’ve grown too in their economy, and they should have a say in what’s going on. But at the same time, uh tearing down the United States and uh putting an immense amount of disruption into a very stable financial system puts a huge amount of risk for the global population in the near term.

MIKE BARNES 13:06

Again, something we’re gonna have to watch out for as BRICS continues in the future. Now that they’ve turned 18, I guess you could call them an adult. Ed Moy, thanks so much for joining me today. Absolutely good to be with you, Mike. Acronyms are a part of life these days, especially with social media, but this is not an LOL type of thing. We have to pay attention to BRICS because it’s definitely going to affect us in the future. That’s all the time we have for today’s episode. On behalf of all of us here in the U.S. Money Reserve Studios, I want to thank you so much for tuning in. If you have any questions or you want to learn more about today’s episode, you can call the number in our episode description and speak with one of our friendly account executives. They’re going to be more than happy to answer any questions you may have about precious metals and the strategic role they can play in achieving a secure and comfortable financial future. I’m Mike Barnes. We will see you next time on America’s Gold Authority Podcast.