- The BRICS nations have driven the gold price to a record high through massive gold purchases.
- This is part of their strategy to de-dollarize and introduce a new, gold-backed payment system.
The gold price has reached a new record high in recent days, and experts see a clear connection to the massive gold purchases by the BRICS nations. China, in particular, has acquired over 2,800 tons of gold in the last two years, and other BRICS countries have also significantly increased their gold reserves.
Geopolitical Tensions and De-dollarization Fuel Gold Demand
Analysts identify geopolitical tensions, tightened sanctions, and de-dollarization as the main reasons for the increasing gold demand. Gold is seen as a safe haven asset in times of uncertainty, and the BRICS nations’ efforts to reduce their reliance on the US dollar have further fueled this demand.
China’s central bank has been actively selling US debt and diversifying its assets, and other central banks are following suit. This has led to a significant decline in dollar reserves globally, as confirmed by the International Monetary Fund (IMF).
The BRICS nations’ gold purchases are part of a de-dollarization plan launched in 2023. The group aims to introduce a new international payment system to replace the US dollar. They are developing a multilateral payment platform called BRICS Bridge, which will allow them to trade across borders using alternative currencies, including gold and other commodities.
BRICS Advances with UNIT System
The BRICS bloc has reportedly made progress in developing a stablecoin called UNIT, backed by a reserve basket consisting of 40% gold and 60% gold-convertible BRICS currencies. This further explains the significant accumulation of gold reserves by these nations.
While no official details about the new currency have been released, it is becoming increasingly likely that BRICS will issue gold-backed money, further driving up the price of gold.
Although there is no launch date yet, and it’s too early to predict the extent of this currency’s adoption, some voices suggest that the BRICS’ de-dollarization mission with the stablecoin could reach a higher peak sooner than expected.
Nasdaq analysts believe that the potential BRICS currency would allow these nations to assert their economic independence and compete with the current international financial system, characterized by reduced dollar involvement.
Currently, the US dollar dominates the global financial system, accounting for around 90% of all foreign exchange trading. However, a growing number of countries are opting for gold as a hedge against the US dollar, and the fear of losing dollar dominance is leading investors to explore other assets, including cryptocurrencies like Bitcoin.
Russia is already taking steps in this direction by legalizing cross-border payments with digital currencies and Bitcoin mining. The involvement of cryptocurrencies in trade between China and Russia is also becoming increasingly noticeable as transactions with local currencies become more difficult.
While the exact role of cryptocurrencies in this de-dollarization process remains to be seen, it is clear that the BRICS nations’ efforts to reduce their reliance on the US dollar are having a significant impact on the global financial landscape, with gold playing a central role in this shift.