BRICS Nations Stockpiling Gold to Shift Away from US Dollar

In the Brief:

  • BRICS nations, led by China, are buying large amounts of gold to reduce reliance on the US dollar.
  • This gold accumulation is expected to continue.
  • A new currency, backed by gold, may be created to reduce global dependence on the dollar.
  • More trade is being conducted in Chinese yuan.

3 - 5 minute read

In recent years, a group of economically-aligned nations known collectively as BRICS (Brazil, Russia, India, China, and South Africa) have been making headlines for their growing interest in gold. According to a new report from U.S. Global Investors, these nations are piling into the precious metal and will continue to be “huge buyers” of gold for the foreseeable future. What is driving this trend, and what does it mean for traders?

Frank Holmes, CEO and chief investment officer of U.S. Global Investors, suggests that the mass accumulation of gold by BRICS nations aligns with the theory that the world is on a long-term path to economic bifurcation. Speaking to this, he notes that “we may be seeing the emergence of a multipolar world, with a U.S.-centric world on one side and a China-centric world on the other.” For the first time ever, BRICS countries’ share of the global economy has surpassed that of the G7 nations (Canada, France, Germany, Italy, Japan, the U.K. and U.S.), on a purchasing parity basis.

China, in particular, has been adding to its stockpiles of gold at an impressive rate. According to a report from World Gold Council, China added 102 tons of gold to its stockpiles since the start of the year. What is driving this interest in the precious metal?

Holmes suggests that gold is the key to this potential multipolar economic future, as it will likely be used to back the creation of a new currency that does not utilize the U.S. dollar. “The BRICS need the precious metal to support their currencies and shift away from the U.S. dollar, which has served as the global foreign reserve currency for about a century,” he explains. “More and more global trade is now being conducted in the Chinese yuan, and there are reports that the BRICS—which could eventually include other important emerging economies such as Saudi Arabia, Iran and more—are developing their own medium for payments.”

In fact, BRICS nations are reportedly in the early stages of designing a new currency that aims to end global dependence on the dollar. However, early critics like billionaire Chamath Palihapitiya have suggested that China will never effectively de-dollarize as long as the yuan remains pegged to the dollar.

What does all of this mean for traders? While it is difficult to predict the exact impact of these developments, it is clear that the growing interest in gold by BRICS nations is part of a larger trend towards economic multipolarity. Traders should keep an eye on these developments and consider the potential opportunities and risks associated with this trend.

One possible opportunity for traders is to invest in gold, which could see increased demand as BRICS nations continue to stockpile the precious metal. However, traders should also be aware of the potential risks associated with investing in gold, such as market volatility and fluctuations in demand.

The Bottom Line

As BRICS nations continue to pile into gold and prepare for a potential multipolar economic future, traders should stay informed about these developments and consider the potential opportunities and risks associated with this trend. While it is difficult to predict the exact impact of these developments, it is clear that they are part of a larger trend towards economic multipolarity that traders should pay attention to.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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