Experts React: How Will BRICS Currency Affect Gold?

Friday, 21 July at 8:00 AM CST | 

Experts React: How Will BRICS Currency Affect Gold? 

Rumors of a gold-backed currency by political-economic alliance BRICS has created a groundswell of interest in the bullion community. Following Russian confirmation of BRICS’ the plan for a gold-standard currency last Saturday, gold remains up, trading at $1,980 this afternoon. With over 41 countries committed to using it, some experts fear that a BRICS currency could topple the United States Dollar as the reserve currency of the world.

The alliance is set to meet in August, and analysts predict that the member countries will officially plan the new currency during the BRICS Summit. 

We know that the news is coming, but how will this new gold-backed currency influence the price of gold? Experts react: how will BRICS currency affect precious metals prices? 

Yellen Reacts to Rumors

U.S. Treasury-Secretary Janet Yellen reacted to rumors of a new BRICS currency earlier this month. Yellen offered an optimistic view on the place of the United States Dollar, remaking that there remains “no meaningful workaround” for countries looking to displace the greenback as their reserve currency. Speaking to Congress in June, Yellen reiterated data from the International Monetary Fund that suggests the USD makes up over 58% of foreign exchange reserves. U.S. currency is only challenged by the Euro, which accounts for only 20.5% of all global reserves.

Still, Yellen cautioned investors to expect a decline in the reserve dominance of the United States Dollar. Calling it a “natural desire to diversify,” she anticipates a “gradually increased share” of other assets in global currency reserves. 

Gold Volatile Following BRICS Currency Speculation

Yellen clearly doesn’t fear the prospect of total de-dollarization, but the gold market has been quick to react. Prices initially jumped following Russian confirmation of the planned alternative BRICS currency, causing gold to spike to a multi-month high before trending sideways as rumors faded away. 

Demand for gold spiked initially as discussions peaked, but it appears that investors are waiting for more confirmation before we’ll see steadier price movement in any direction. 

Expert: “Buy the Rumor, Sell the News”

Not all investors are bullish on Gold in the midst of BRICS currency rumors. Stony Chambers Asset Research claims that a BRICS currency “should have little or no impact” on the long-term price action for gold. Some investors plan to ‘buy the rumor, sell the news‘ as BRICS continues their plan for the new and controversial gold-funded currency. 

According to Stony Chambers, the groundswell of interest in gold following BRICS’ initial announcement provides a “promising short-term swing trade opportunity.” Paired with concerns about inflation and U.S. deficit woes, the persistent BRICS rumors might be a perfect storm for significant short-term price action. But just as Stony Chambers warns, the actual impact might underwhelm. 

Silver has also been up this month, suggesting that the entire precious metals industry is bracing for the impact of BRICS’ August summit and the release of the alliance’s new gold-backed currency. 

Stackers Brace for Impact of August BRICS Summit

Some investors are building their gold stacks as we wait for more news from BRICS. If the actual result of the summit is underwhelming, investors might secure a short-term profit by timing the market. Others continue to hold their gold assets, buying a functional dip before the big news drops at the August summit. 

Hero Bullion will keep you updated with the latest in this developing story. Is now the time to buy the rumors and sell the dip, or will the August unveiling of a new gold-backed currency push gold prices to a new all-time high? Only time will tell.