The possibility of the BRICS nations introducing a gold-backed currency has caused a remarkable surge in the precious metals market, with several metals reaching new multi-month highs. This intention, driven by escalating tensions between the Western economies and the BRICS countries (Brazil, Russia, India, China, South Africa), underscores a growing resolve to challenge the U.S dollar's dominance. The announcement has invigorated the "de-dollarization" movement, initially fueled by the global response to the COVID-19 pandemic's inflationary pressures and the "exported inflation" effect of a strong dollar.

Emerging Market economies are grappling with inflation, weakened local currencies, and heightened sensitivity to U.S. interest rates, fuelling their aspiration to diminish reliance on the U.S. dollar. Concurrently, global central banks have been breaking records in purchasing gold since mid-2022, with 71% of them planning substantial increases in gold acquisitions, including key BRICS members Russia, China, and India. This trend, doubling the amount of gold bought in 2022 from the previous year, reveals an unambiguous signal that something significant is on the horizon in the global financial landscape.

 

The potential introduction of a gold-backed currency by the BRICS nations could mark a profound shift in international finance. From the surging prices of precious metals to the implications for the U.S. dollar and the rapid pace of central banks' gold purchases, the effects are immense. Key events, such as the BRICS summit in Johannesburg on August 22, 2023, will be closely watched, with far-reaching impacts on emerging economies, global inflation trends, and the international financial system. In this evolving scenario, the inclusion of commodities in an investment portfolio becomes ever more crucial, presenting a combination of intriguing opportunities and challenges that may redefine the global financial order.

 

Updated Information

September 2023: Leading up to the 2023 BRICS Summit, there was widespread speculation about a potential new currency announcement. However, this expectation proved premature. The development of an alternative currency is currently viewed as a medium to long-term objective, with no immediate proposals for a BRICS currency. Anil Sooklal, the BRICS ambassador from South Africa, highlighted that nearly 40 nations have indicated their desire to join the BRICS group.

 

During the 2023 Summit, six countries—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE—were invited to join BRICS, with all but Argentina scheduled to officially become members in January 2024. U.S. sanctions against Russia and Iran have prompted the two nations to explore the creation of a BRICS currency to counteract these restrictions. As Iranian Ambassador to Russia Kazem Jalal stated during the Russia-Islamic World Kazan Forum in May 2024, the goal is to reduce the economic impact of sanctions. However, the feasibility of a BRICS currency remains debated, with some analysts citing the economic diversity of the BRICS nations as a potential obstacle. Concerns also exist regarding the dominance of China's yuan in the coalition's currency plans. Notably, when Russia requested India to pay for oil in yuan in October 2023, India declined, opting for payments in either U.S. dollars or rupees, underscoring the challenges ahead for the coalition's currency ambitions.

 

2024 BRICS’ Summit

An announcement made on March 5 by Yuri Ushakov, a senior aide to the Russian President, revealed that the 2024 BRICS Summit will occur in Kazan, Russia, from October 22 through 24.