Does A BRICS Gold Currency Really Matter?

[GoldCore]

Next Tuesday the BRICS nations will meet in South Africa for the group’s 15th summit. This could be a game changer for gold.

For something that only officially existed eight years after the term ‘BRICs’ was created, the bloc known as “The BRICS” has rapidly gone from an informal term for a group of fledgling economies to one which is carrying increasing weight when it comes to the future of the global system.

Next week’s summit, hosted by South Africa, will not only welcome leaders of the BRICS nations (excluding Putin, no explanation needed) but also a further 67 leaders from Africa, Latin America, the Caribbean and Asia. Of these 67 leaders, 23 have formally applied for membership of the bloc, all hoping to follow in the footsteps of South Africa who joined in 2011.

Something that has long been rumoured (and was discussed by me, just last month) is the creation of a common BRICS currency. It makes sense: the main impetus of the bloc is to rebalance the world order. Nothing creates imbalances in the global economy quite like US dollar hegemony.

In truth, discussion of a gold-backed common currency is nothing new. In the last 20 years alone Asian and African leaders have suggested it. Most insightful was in 2009 when the then head of China’s central bank, Zhou Xiaochuan, wrote:

“An international reserve currency should first be anchored to a stable benchmark and issued according to a clear set of rules … [Its] adjustments should be disconnected from economic conditions and sovereign interests of any single country. The acceptance of credit-based national currencies, as is the case in the current system, is a rare special case in history.”

Of course, nothing has happened so far. But are we reaching a point where it might just?

 

In July we perhaps had confirmation of how serious the proposal was when state-sponsored channel RT reported that the “BRICS were planning to introduce [a] new trading currency backed by gold in August.”

It is worth noting that there is no mention of a new currency on the agenda for next week’s meeting. How much one can believe this, is anyone’s guess.

Is it fool’s gold to plan a common currency?

Clearly it will be no mean feat to agree upon and establish a BRICS currency. The five member nations alone all might all wish to establish an alternative to the status quo, but their agendas on the foreign stage do vary significantly.

Despite the political clout of the emerging group of current and wannabe members of the BRICS, there are some major issues tearing through their economies. Take the collapse of the rouble, or the recent dumping of Chinese stocks and bonds by foreign investors. Not to mention the personal desires of soon-to-be Argentianian President Milie who wants to demolish the central bank and bring in the US dollar as the national currency.

With such differences, how much are the BRICS nations really able to achieve? As BRICS-term ‘creator’ Jim O’Neill told the FT, they have “never achieved anything since they first started meeting”.

But we think this is short-sighted and to believe this is to consider the nations as though they are still in the third-world. No one is suggesting that a single currency is introduced and that sovereign currencies are forfeited (as per the Eurozone).

No, instead a common trading currency has been proposed. And, this could be major.

To take a phrase from Chinese foreign minister Wang Yi:

“The BRICS countries are like five fingers: short and long if extended, but a powerful fist if clenched together.”

Currently the bloc is made up of just five countries but should the additional 23 members currently seeking membership manage to join then this will significantly improve the political dimension of the group and prove a much stronger counterbalance to the G7 and G20 countries.

The threat is on the sidelines

What is most interesting to note is that it seems to be non-BRICS member Saudi Arabia that is leading the dedollarization process. See their comments in January about being open to a non-dollar oil trade.

Should they become a member, then we will be up for some very interesting times indeed. As former GoldCore TV guest Jim Rickards explained recently:

“…okay so what happens when you let Saudi Arabia into the bricks given the other members you have two of the three largest oil producers in the world. Russia and Saudi Arabia you have two of the three largest nuclear arsenals  [and] some others…These are not basket cases these are many of the biggest economies in the world that collectively have enormous power natural resources: gold reserves, land, mass population, military and again I could go down the list but this is a block that is as powerful in its own way by a lot of these metrics as the collective West.”

Why gold?

One could ask why is it gold that is being touted? Why not a basket of currencies, or even a basket of resources? Why not a totally new currency, as we saw with the Euro?

Because gold is borderless. Is it already accepted as currency – central banks hold it in reserve. It requires no central bank or mechanism by which to manage it.

BRICS currency naysayer Jim O’Neill stated:

“It’s a good job for the west that China and India never agree on anything, because if they did the dominance of the dollar would be a lot more vulnerable,”

But the fact is, they do agree on something – that gold is money. Because it is a sovereign currency, it cannot be manipulated as fiat currencies can. The BRIC nations are unlikely to agree to anything that sees them support another fiat currency – the world learnt the hard way when they watched Bretton Woods play out. Look where that got us.

If countries can get past their differences and agree to a gold-back common currency then the symbolism of holding one another’s gold will be huge. The precious metal is the perfect arbitrator.

As we saw in Roman and later medieval times, rulers would send their children to live in formerly hostile kingdoms in order to secure peace. Imagine Chinese gold being held outside of China.

Does Gold Need There To Be a New Gold Standard?

Do we really need a gold standard to set gold on fire? With gold currently trading in a tight range between $1890 and $1900 it might feel pretty tedious and like we need something more than the FOMC minutes to drive the price, but in truth it’s going to be just fine.

Gold doesn’t need to officially back a currency in order to shine. Should the BRICS decide to create a common currency, the US (and others) won’t take it lying down and this will see gold do well.

Currently, much of the focus is what will happen to gold, should there be a gold-backed currency. Instead, the focus should be on what will happen to gold should the BRICS merely put a plan in place to manage the transition to a new, common currency (gold-backed or otherwise).

Just like when you see invasions of countries or military coups taking place, it is not the final regime that will cause the most upset, instead it is the ‘in-between’, it is the transition to the new regime or the new currency that will cause the most upheaval.

Of the many scenarios gold likes, it is the ones with uncertainty that it likes best. The whole world is (one way or another) invested in the dollar-led financial system. The five countries that currently make up the BRICS represent 40% of the world’s population and 26% of the global economy.

Patrick Karim on gold, inflation and the next break out

 

This is not some pesky group that is proving to be a minor distraction. The group does have the potential to be very disruptive, on a number of fronts. Should a move outside of the US-dollar system become one that is etched in gold, then this will make for a very uncertain time indeed.

The mere conversation and posturing around the launch of a common currency will be disruptive enough. It is clear that the first step for the BRICS will be to establish an efficient, widely-adopted and integrated payment system for cross-border transactions and only then will there be a realistic opportunity to introduce a new currency.

There is plenty going on elsewhere in the world (shoddy central bank management, slow US banking crisis, fiscal dominance, etc) for gold investors to get excited about. So if no new currency is announced next week then please just keep calm and carry on.

 

[Mox]

I have been keeping an eye on this since rumours started circulating. I believe 30 countries in total have signed up to the BRICS lead gold backed currency

The dollar has had its day as the world reserve currency.

Central banks (mainly those in the "Global South") have been boosting their gold reserves for several months but having read opinions from various sources I think possibility of a launch of a new gold backed currency next week is taking things too far, more likely they will announce plans for its introduction at a later date. We will see.

Also of interest is the recent deal between India and the UAE for a million barrels of oil, with payment being made in rupee's, not the first country to have done deals with oil producers in the Middle East. A Memorandum of Understanding was signed in July for a new system allowing trade between the two countries using the rupee and dirham.

With the USA increasingly weaponizing financial sanctions and the freezing of bank accounts to punish countries/people they don't like the rest of the world (apart from the West) have taken note and are looking for ways around it.

Due to the world using the dollar they also receive any financial problems occurring in the US, due to the massive dollar printing over the past couple of years inflation has also spread worldwide. And on inflation, how the f*ck could the Fed say inflation was going to be transitory given all the money printing that has gone on (USD M2 $14T in 2019 rising to $21T now, 20% of all the dollars ever created were issued in 2020...).

The interaction/dependence of economics across the world at various levels is fascinating and I would suggest everyone reads more about it, big changes are coming, it all follows a cycle, reserve currencies never survive, currencies never survive, only gold and silver have survived for several thousand years and they will outlast anything put in place that isn't backed by anything physical.

Hopefully a new gold backed currency will allow for real price discovery for precious metals rather than the fix that goes on at the moment, if gold jumps I wouldn't like to be someone holding paper gold, try and redeem your paper for gold that has been sold multiple times over, I'm quite looking forward to the financial chaos, you don't need Fight Club to rebalance the world, just greedy psychopaths who are playing the real version of Risk looking for world domination.

Other factors include China's Belt and Road initiative, the West losing its presence in Africa, fragile supply chains due to globalisation, the ridiculous Climate Change con (I have a degree in Environmental Studies, number one concern should be the use of plastics and forever chemicals), the focus on gender with the rise of the snowflake generation (making the West look weak and we are seeing the recruitment into the armed forces drop, might we see compulsory military service introduced again?) and the lack of statesmen in western politics (watch the way Sergei Lavrov destroys arguments made by the west (or Mohammad Zarif did for Iran until he was replaced a couple of years ago), if you look at it from a neutral standpoint it is no wonder the rest of the world doesn't trust the West.

I am starting to ramble but there is much more to this jigsaw which will reshape global relationships over the next few years and things will get bumpy, when a nation starts to lose global hegemony it tends to lash out and the purveyors of global death and destruction started to flex their muscles against the big players under the Biden administration.

Sorry if this is a bit disjointed but there is lots to consider.

[Zhorro]

As far as I can work out, I don't think anything concrete will happen next week regarding a BRICS gold backed currency.  The current price action in the gold market would seem to imply that the big players are not expecting much to happen next week.  There will be general discussion about the future, and further discussion about de-dollarization.

[Tn21]

Thank you for another good read.

 

The collapse of svb and signature bank will probably have done more for the price action of gold than the brics gold currency. Having said that it can only be a positive move for us selfish gold bugs 😆. It will be great to see big green candlesticks on the gold chart but I don't think we will get that over the next few weeks or months. 

Most of us have been inclined to believe that a financial crash is on the horizon. I had a look at the price of gold during the financial crisis of 08/09 & it did take a big hit only to recover later on in the championship rounds (USD) 

By the end of the decade I do believe we will see digital currencies in full motion. Who knows what can be done here but I don't see much room for gold being a part of it. 

I was a gold bug, but I'm stepping back, well back and now trying to reprogram my mind to take the shine away from the yellow metal. 

 

In au we trust 🙌

 

Edited August 17, 2023 by Tn21

[Bratnia]

On 17/08/2023 at 22:52, Tn21 said:

Thank you for another good read.

 

The collapse of svb and signature bank will probably have done more for the price action of gold than the brics gold currency. Having said that it can only be a positive move for us selfish gold bugs 😆. It will be great to see big green candlesticks on the gold chart but I don't think we will get that over the next few weeks or months. 

Most of us have been inclined to believe that a financial crash is on the horizon. I had a look at the price of gold during the financial crisis of 08/09 & it did take a big hit only to recover later on in the championship rounds (USD) 

By the end of the decade I do believe we will see digital currencies in full motion. Who knows what can be done here but I don't see much room for gold being a part of it. 

I was a gold bug, but I'm stepping back, well back and now trying to reprogram my mind to take the shine away from the yellow metal. 

 

In au we trust 🙌

 

Paper currencies or digital currencies are still a debt. Gold is money, a asset. Many currencies are already mostly digital, many pay by touch/card for instance. Blockchain is the in-vogue, a public shared ledger instead of the ledger being distributed/separated (isolated/private). The downfall of a common public ledger is a single/concentrated risk factor. Once a big hit occurs against that I suspect the tendency will be to revert back to distributed private ledgers.

[Bratnia]

On 17/08/2023 at 16:15, Mox said:

I have been keeping an eye on this since rumours started circulating. I believe 30 countries in total have signed up to the BRICS lead gold backed currency

The dollar has had its day as the world reserve currency.

Central banks (mainly those in the "Global South") have been boosting their gold reserves for several months but having read opinions from various sources I think possibility of a launch of a new gold backed currency next week is taking things too far, more likely they will announce plans for its introduction at a later date. We will see.

Also of interest is the recent deal between India and the UAE for a million barrels of oil, with payment being made in rupee's, not the first country to have done deals with oil producers in the Middle East. A Memorandum of Understanding was signed in July for a new system allowing trade between the two countries using the rupee and dirham.

With the USA increasingly weaponizing financial sanctions and the freezing of bank accounts to punish countries/people they don't like the rest of the world (apart from the West) have taken note and are looking for ways around it.

Due to the world using the dollar they also receive any financial problems occurring in the US, due to the massive dollar printing over the past couple of years inflation has also spread worldwide. And on inflation, how the f*ck could the Fed say inflation was going to be transitory given all the money printing that has gone on (USD M2 $14T in 2019 rising to $21T now, 20% of all the dollars ever created were issued in 2020...).

The interaction/dependence of economics across the world at various levels is fascinating and I would suggest everyone reads more about it, big changes are coming, it all follows a cycle, reserve currencies never survive, currencies never survive, only gold and silver have survived for several thousand years and they will outlast anything put in place that isn't backed by anything physical.

Hopefully a new gold backed currency will allow for real price discovery for precious metals rather than the fix that goes on at the moment, if gold jumps I wouldn't like to be someone holding paper gold, try and redeem your paper for gold that has been sold multiple times over, I'm quite looking forward to the financial chaos, you don't need Fight Club to rebalance the world, just greedy psychopaths who are playing the real version of Risk looking for world domination.

Other factors include China's Belt and Road initiative, the West losing its presence in Africa, fragile supply chains due to globalisation, the ridiculous Climate Change con (I have a degree in Environmental Studies, number one concern should be the use of plastics and forever chemicals), the focus on gender with the rise of the snowflake generation (making the West look weak and we are seeing the recruitment into the armed forces drop, might we see compulsory military service introduced again?) and the lack of statesmen in western politics (watch the way Sergei Lavrov destroys arguments made by the west (or Mohammad Zarif did for Iran until he was replaced a couple of years ago), if you look at it from a neutral standpoint it is no wonder the rest of the world doesn't trust the West.

I am starting to ramble but there is much more to this jigsaw which will reshape global relationships over the next few years and things will get bumpy, when a nation starts to lose global hegemony it tends to lash out and the purveyors of global death and destruction started to flex their muscles against the big players under the Biden administration.

Sorry if this is a bit disjointed but there is lots to consider.

If you think the US dollar is bad, wait and see just how bad the BRICS alternative(s) will be. They'll be no common agreement, a major based on the Yuan perhaps ... that will be manipulated/exploited sooner or later. Nothing out of China can really be considered reliable, open and transparent, more a case of just figures presented in reflection of the picture desired to be painted rather than actual realities.

[GoldDiggerDave]

No, It will make zero difference, as those in control can make anything obsolete by decree.     The dollar is set to have 40-50% of world transactions as local fait currencies fail one by one.  I have been watching Lebanon for the last 4 years, and the hyper inflation they have had and everyone rushes towards the dollar for stability.    I think once we see a CBDC dollar it will make all fiat obsolete everywhere overnight, as you are either in the new system or you are not and if you are out of the system what have you really got oil?    We are making that obsolete, what other commodities have nations got hold over the west?  Meat production, food.......they are doing their best to make certain food stuffs and commodities  obsolete.......ever ask why?      

I've got a feeling if its not digital its worthless cash, assets, PM's everything.   We still cling on to liner thinking and that everyone plays fair by the same rules, they don't and by a simple decree the rules have changed......"let it be done".

We will end up with a digital currency that can only be used via google and the  western banking system,  amazon, eBay, uber, apple, and all other wester companies that use google or western banks . 

Just try and live for a month outside this system today,  no banking, no transactions and you can't use any western company whatsoever.  Like it or not once this system is active you will comply. 

At least in the fictional story when Skynet became  self aware humanity had a chance to fight back, we won't be that fortunate in real life.............I'm off to shine my tinfoil hat 🤣