Category: Financial Markets Commentary

For more than 20 years, international organizations have been evolving that serve as an alternative to the US-led organizations such as G-7, G-20, and the World Bank.  The Shanghai Cooperation Organization was first created in 2001 as a security and defense organization.  It includes Russia, China, India and five other countries.  In addition, many other countries participate as “dialogue partners,” observers or guests.

The BRICS nations (Brazil, Russia, India, China, South Africa) represent a group of nations with the same core group that seek intergovernmental cooperation.  BRICS is headquartered in Shanghai and its five core countries have a combined population of 3.21 billion people with a total GDP on a purchasing power parity (PPP) basis of US$ 56.65 trillion or 32.5% of global GDP-PPP.  It is responsible for the creation of the New Development Bank, which is an alternative to the World Bank and funded with $100 billion of initial capital.

Since the war started in Ukraine, a US-backed global task force claims that $300 billion of assets owned by Russia’s central bank and $30 billion of assets owned by sanctioned Russians have been frozen.  The actions by the US government and its allies did not go unnoticed by other countries.  Since then, more international transactions have been paid for with national currencies and central banks have been diversifying their reserve assets.  There are now 41 other countries that are interested in joining BRICS, so the core countries plus the 41 potential new members are often referred to as BRICS+.

BRICS+ will have their annual summit in Johannesburg, South Africa on August 22-24 this year.  While there has not been an official announcement yet, there have been recent posts by Russia and Iran regarding a new gold-backed currency for international trade.  On July 5, RT News, the English language news agency sponsored by the Russian Government, announced that the BRICS group of countries is set to introduce a new currency backed by gold.  Some other headlines posted on RT.com during the last three weeks include:

• • July 16 – Italian businesses want to switch to rubles in Russia trade
  • July 15 – Taking the dollar down a peg
  • July 12 – Russia seeks to expand de-dollarization drive
  • July 10 – China and Russia should lead “global governance reform” – Xi
  • July 6 – Russia proposes alternative to EU clearing houses
  • June 30 – Central American country (Nicaragua) wants to ditch dollar in Russia trade
  • June 30 – BRICS diplomat comments on what is drawing countries to the bloc

Since 2010, central banks around the world have been net purchasers of gold, after being net sellers for the years 1989-2009.  The pace of central bank gold acquisitions has accelerated in 2023 in anticipation of a new gold-backed currency.

The remainder of the year promises to be an interesting time for the international monetary system and precious metals.  If you have any questions or comments, please contact me.

Sincerely,
Robert G. Kahl
CFA, CPA, MBA