NEWS | August 9, 2023

Do the BRICS countries want to replace the dollar with a commodity currency?

Hand mit Schere und "BRICS" in Farbbuchstaben am Arm schneidet Dollarnote durch.

This would be the starting signal for the commodity turbo boost!

For several days now, a hammer has been hanging over various economic news sites on the internet: The BRICS countries are said to be introducing a gold-backed cryptocurrency, which according to eXXpress-TV is also backed by precious metals such as silver and rare earth elements. Their explicit goal is to replace the dollar in global commodity transactions. The announcement is allegedly scheduled for August 22nd in Johannesburg.

Increased gold purchases by central banks

Some remain skeptical as the primary source of the news is the Russian propaganda channel RT. Additionally, Leslie Maasdorp, the Vice President and CFO of the New Development Bank (NDB), formerly known as the BRICS Development Bank, has denied the news of the planned announcement. However, the new currency is not off the table. Maasdorp referred to it as a “medium- to long-term ambition.” An indicator that the new currency is a possible scenario is the recent gold purchases by several banks in the New Economy countries of China, Russia, and India. This could suggest that price increases in gold are to be expected in the near future.

The end of fiat money?

A highly alarmed reaction to the news of the new currency came from businessman and author of the well-known book “Rich Dad, Poor Dad,” Robert Toru Kiyosaki. He believes that the end of fiat money has arrived. The author envisions a major crash in which inflation in the US skyrockets and the dollar “rushes home,” losing its status as the international reserve currency. In place of the dollar, commodities, gold, and cryptocurrencies would serve as stores of value.

Rising commodity prices as a consequence

According to calculations by business consultant and author Markus Krall, the trading partners of the BRICS countries would need to acquire 16,000 tons of gold in order to use a gold-backed currency for commodity payments. The increased demand would cause the price of gold to increase tenfold, making the BRICS currency the dominant reserve currency. The BRICS countries primarily trade in commodities, the prices of which would rise if the new currency were to actually replace the dollar. This would not only affect gold but also silver, rare earth elements, and other metals whose prices are at least partially correlated with the price of gold.

Whether this will truly come to pass is difficult to predict. However, the fact that commodities are currently undervalued and offer a huge opportunity for attractive tax-free returns is neither a rumor spread by RT nor a secret. In the current market environment, overweighting commodities in the overall portfolio is almost imperative, and their share could be as high as 20%.