18 July 2023
On July 7, 2023, news emerged that the BRICS countries (Brazil, Russia, India, China, and South Africa) are set to implement their plan of introducing a new international currency backed by gold. The announcement followed a meeting of foreign ministers from the BRICS nations and representatives from other countries on June 2, 2023, in Cape Town, South Africa. The objective of this initiative is to reduce reliance on the US dollar and establish an alternative currency for global trade.
With the combined economic output of the BRICS countries nearly matching that of the United States and representing around 40% of the world’s population, the implications of this move could be substantial. Furthermore, additional countries such as Saudi Arabia, United Arab Emirates, Egypt, Iran, Algeria, Argentina, and Kazakhstan may express interest in joining the BRICS alliance.
While specific details about the structure of the new currency are yet to be disclosed, it is speculated that the BRICS could establish a “BRICS Bank” funded by gold deposits from their central banks. These gold reserves would be reflected on the bank’s balance sheet as “BRICS gold.” Loans denominated in BRICS gold could be granted to exporters and importers, with the BRICS Bank accepting further gold deposits from international investors.
The introduction of a gold-backed currency would likely result in increased demand for gold, causing gold prices to rise and potentially devaluing official fiat currencies, including the US dollar and BRICS currencies. The BRICS countries would aim to accumulate gold reserves, benefiting from the currency transition, while countries with trade deficits, particularly the US, could face challenges.
The potential impact of creating a new gold-backed international currency is significant, potentially leading to significant changes in the global economic and financial landscape. The upcoming BRICS meeting scheduled for August 22–24, 2023, in Johannesburg, South Africa, will provide more insights into the next steps and plans of the participating nations.