BRICS Currency Can Have Far-Reaching Consequences

Despite official denials from the host country, market analysts speculate that a major announcement regarding a gold-backed BRICS currency may be on the horizon during the upcoming 15th BRICS summit in Johannesburg, South Africa from August 22 to 24.

New Gold Exchange Standard in the Making 

According to a recent research report by London-based CrossBorder Capital, there are indications that the BRICS economies, along with over 40 ‘friendly’ nations, are poised to endorse a new gold exchange standard. This standard would utilize the burgeoning gold reserves of BRICS member countries – Brazil, Russia, India, China, and South Africa – to partially back an as-yet-unnamed international currency unit.

Experts believe that such an announcement would mark a significant development in international finance, comparable to the historic 1971 Nixon Shock, when the United States abandoned the gold standard.

A Challenge to US Dominance 

London-based CrossBorder Capital views the potential introduction of a gold-backed BRICS currency as a strategic move by China to challenge the dominance of the U.S. dollar in global finance. The analysts suggest that this move could potentially hasten China’s ambition to rival the United States’ financial might on the world stage.

However, they caution that the impact of a gold-backed BRICS currency would likely be more political than economic. The researchers predict that the US dollar’s centrality in global trade, financial markets, and reserve status is unlikely to be significantly affected.

While BRICS nations are set to possess substantial gold reserves, experts acknowledge that the US dollar’s position as the world’s primary reserve currency is deeply ingrained. The analysts contend that the dominance of the US dollar stems not only from its denomination in global trade but also from the underlying stability provided by the US Treasury market and the support of the US military.

Concerns

Moreover, analysts raise concerns that the introduction of a gold-backed BRICS currency could trigger a surge in gold demand, potentially leading to scarcity in the global gold markets and a weakened US dollar. Such an outcome could have unintended consequences, making many emerging economies, including China, less competitive.

As the summit approaches, the world awaits with bated breath to see whether the BRICS countries will unveil their plans for a gold-backed currency and, if so, how the international financial landscape may be reshaped. The eyes of the financial community will be keenly fixed on Johannesburg for any potential hints of a new chapter in global finance.