Russia, other BRICS nations planning new gold-backed currency

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As tension with Western economies grows, Russia along with the other BRICS countries (Brazil, India, China and South Africa) have made their next move to weaken the dominant status of the US dollar.

Last Friday, the Russian Embassy in Kenya declared that “the BRICS countries are planning to introduce a new trading currency, which will be backed by gold.” The news was confirmed by RT, the Russian state-controlled TV network.

The announcement adds further momentum to the much discussed “de-dollarization” movement that has intensified since the Western sanctions against Russia for its invasion of Ukraine.

However, as the BRICS bank confirmed days before Russia’s announcement, the creation of a common currency is more of a “medium to long term ambition” and the bank “doesn’t have any immediate plans for the group to create a common currency.”

“There is no suggestion right now to creates a BRICS currency,” Leslie Maasdorp, VP and CFO of the New Development Bank, said in an interview last week with Bloomberg TV, citing that “they aren’t ready to challenge the global dominance of the dollar.”

Central banks diversifying

Since mid-2022, global central banks have began buying gold at a historic pace to diversify their reserves. The prominent buyers last year include China and India, both part of the BRICS bloc of nations.

An Invesco survey published on Monday confirmed that an increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia.

The financial market rout last year caused widespread losses for sovereign money managers who are “fundamentally” rethinking their strategies on the belief that higher inflation and geopolitical tensions are here to stay, Invesco said.

Geopolitical concerns, combined with opportunities in emerging markets, are also encouraging some central banks to diversify away from the dollar, the survey found.

Nearly 80% of the 142 institutions surveyed see geopolitical tensions as the biggest risk over the next decade, while 83% cited inflation as a concern over the next 12 months.

(With files from Bloomberg and Reuters)