BRICS Nations Consider New Gold Standard

Tuesday, 11 July at 4:00 pm CST | 

BRICS Nations Consider New Gold Standard

BRICS is a political-economic alliance between Brazil, Russia, India, China, and South Africa. The term itself was coined in 2001 by a Goldman Sachs analyst who believed that the first four nations in the group would eventually come to dominate the global economy. 

Dethroning the United States Dollar has been a primary objective of the coalition for several years. Fears that the plan might be successful were reignited this week as Russia confirmed the organization’s plan to dismantle the value of the United States Dollar using their own form of currency. This comes after rumors that BRICS negotiations have surrounded a return to the gold standard. 

The move has already fueled speculation that the USD’s dominance might be under attack by these countries. 

BRICS Currency Could Devalue U.S. Currency

Economic strategist Simon Hunt reiterated the threat posed by a global return to the gold standard early this week, remarking that a full gold standard backed by BRICS might be on the way “before 2030.” In addition to addressing rumors of BRICS newest attack on the strength of the U.S. Dollar, Hunt explained that the structure of BRICS as an organization offers exceptional “depth.”

Analysts are divided on the efficacy of BRICS’ recent efforts. Marcus Ashworth of LiveMint highlighted the limited trade output of the coalition, calling their efforts to dethrone the United States Dollar “an exercise in futility.” Ashworth contends that the utility of the USD in global commerce is a “defining element” in its global dominance. 

Joseph W. Sullivan is a Lindsey Group senior advisor. Writing for Foreign Policy, he asked readers to consider the ‘bric,’ a hypothetical global currency that would function similarly to the cross-border Euro. Even given the limited commerce output of BRICS countries outlined by Ashworth, the “bric or bust” mentality that BRICS members could adopt would force countries to utilize the currency to trade with major world powers like Russia, China, and Brazil. 

Will BRICS Adopt the Gold Standard? 

Economists have already highlighted the potential use-cases of a rival currency to the United States Dollar. According to the Mexico Daily Post, 41 countries have already signed up to accept the new currency, which will be released during August’s BRICS summit meeting. But what will the new currency look like? 

Headlines from Russian-owned news station Russian Today seem to support the hypothesis that BRICS new currency will represent a global return to the gold standard. RT remarked that the “gold standard will be of great benefit to strengthening new single currency” in one article. One tweet from RT outlined BRICS’ plan to unveil a new gold-backed currency during August’s BRICS summit. 

BRICS is set to introduce a new currency backed by gold, in contrast to the credit-backed US dollar, with the decision coming a month ahead of the bloc's summit in Johannesburg. With the growing initiative, more and more countries are lining-up to join the group. pic.twitter.com/U5ExGv4IE3

— RT (@RT_com) July 5, 2023

The global economy continues to wait until more news emerges about the new currency. As Russia grapples with internal unrest and an increasingly desperate situation in Ukraine, raging against the U.S. Dollar’s dominance appears to be a primary objective of the BRICS alliance. 

Adoption of a gold-backed currency by 41 major national governments could mean a legitimate threat to the USD’s status as reserve currency. The precise effects of the move are tough to predict, so investors are closely watching as BRICS plans for the pivotal summit meeting next month. 

Yellen Defends U.S. Dollar Against BRICS Threat

Janet Yellen offers an optimistic view on the dominance of U.S. currency. Responding to rumors about BRICS’ proposed alternative currency, the Treasury Secretary reiterated her belief that the displacement of the USD as reserve currency remains very unlikely. In one interview, she outlined that she doesn’t see the reserve currency status of the United States Dollar “being threatened” by the development of BRICS’ new currency. 

She does have one thing right: the United States Dollar is used for nearly 90% of all global transactions. This dominance seems tough to shake, especially by a relatively new currency without the backing of several notable world powers.

Still, the talk of a global return to the gold standard is big news for bullion collectors.

How might a new BRICS gold-backed currency affect gold spot prices? Hero Bullion will keep you updated with the latest news concerning BRICS and their new gold-backed currency.