Is BRICS Currency Backed by Gold?

What is BRICS?

BRICS is an acronym for five of the largest emerging countries. BRICS stands for Brazil, Russia, India, China and South Africa. Of the five, three are considered superpowers and the remaining two are thought to be current or emerging superpowers according to Wikipedia. 

The overall goal of BRICS is to help promote peace and security as well as development and cooperation. It could be easily suggested, considering the current geo-political climate, that Russia is not exactly up to the task. This being said, the question remains … 

Is BRICS Supported or Backed by Gold?

According to the Mises Institute, BRICS has a combined gold reserve of over 5,300 tons. Though this is not quite the equivalent of America’s numbers, being a little over 8,100 tons, it does put the powerful organization within range of the United States’ status as the world’s premier gold reserve. So, the quick and easy answer is that, yes, BRICS is backed by gold; a lot of it.

Furthermore, BRICS appears to be purchasing more gold and at a more accelerated pace than usual in anticipation of possibly creating its own currency that, according to speculation, would be backed by gold or some other precious metal. The idea here is that these countries could then end their reliance on the U.S. dollar.

How Would BRICS’ Gold-Supported Currency Affect the Global Economy?

That’s not an easy question to answer. Earlier this year, some international economists suggested that the dollar’s dominance in the global market doesn’t quite have the allure it used to. Needless to say, when a global leader shows some spot of weakness, competing countries can begin to scheme. 

BRICS is doing just that. One of the ideas floated by this grouping of nations is to create a new currency backed by gold. This being said, it’s worth noting that it might prove difficult, if not impossible, for these countries to completely de-dollarize as the value of their own national currencies is ironically still attached to the dollar.

Why Would BRICS Back Their Own Currency with Gold?

The dollar started facing tougher times following Putin’s invasion of Ukraine. The United States banned Russia from the dollar system, but Russia is a massive exporter of oil and China is their largest importer. Out of necessity, the two superpowers started trading in Chinese yuan and other affected nations began to follow suit.

However, creating currency out of thin air likely won’t do the trick. Though it might be having a lackluster year, the dollar’s international reputation is solid whereas many would argue that BRICS’ reputation has less stable footing and with currencies that are fundamentally less sound.  

As for the short- and long-term effects, there’s only to wait and see. However, the dollar isn’t going anywhere anytime soon due to the fact that it is so deeply woven into the fabric of the global economy. 

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