As gold and silver prices surge heavily to start the week, precious metals investors will look to Russia to find potential answers to explain the upward trajectory of prices as the 16th BRICS Summit convenes Tuesday in Kazan, Russia.
BRICS is a growing partnership, somewhat like the G7, that has recently expanded to include 10 countries and received interest from many others.
Rumors have swirled about the outcome of the meeting, which is taking place in a country currently at war since the Russian invasion of Ukraine in February 2022.
Many in the precious metals community have speculated that the BRICS summit could provide insight into Russia and China's economic motives, which have become increasingly anti-West in recent years. Chinese President Xi Jinping and Russian President Vladimir Putin have pushed to leave the dollar in global trade despite having economies that are heavily reliant on the currency.
A golden currency
Weeks ago, Putin publicly discussed the possibility of a BRICS currency that would compete globally with the U.S. dollar. Several reports have suggested that the currency would be partially backed by gold and member countries' currencies.
Many countries, specifically those in BRICS and with ties to BRICS nations, have been on gold buying sprees via central banks over the past three years.
Recent data suggests that BRICS countries now own 20% of the world’s gold reserves.
These facts have only fueled speculation that Eastern countries could be looking to create a currency that would compete with the U.S. dollar.
Russia holds 8.1% of global gold reserves, which amounts to a massive 2,340 tons of gold, and China is not far behind with a holding of 2,260 tons. Together, the two nations account for 74% of reserves held by BRICS nations.
‘They did it themselves’
Last week, Putin said Russia has managed just fine despite sanctions against the nation that have heavily restricted its ability to trade with the U.S. dollar.
“Making too much fuss is inappropriate,” he said. “We’re taking individual steps, one after another. In regard to finance, we did not drop the dollar. We were banned and barred from it. And now 95% of all external trade of Russia is denominated in national currencies. They did it themselves, with their own hands. They thought we would collapse.”
Trade between Russia and China has surged in recent years, growing 25% year-over-year in 2023. Almost 90% of that trade is conducted in rubles or yuan.
However, about 50% of China’s foreign reserves are held in U.S. dollars, which could give China difficulties in pulling off any severe attempts at de-dollarization.
Recently, Indian Prime Minister Narendra Modi spoke out against total de-dollarization efforts, claiming that India will not take any measures to harm the United States economy. India is one of the founding members of BRICS, which also includes Brazil, Russia, China, and South Africa. New members include Egypt, Ethiopia, Iran, Saudia Arabia and the United Arab Emirates.
What’s on the agenda?
A press release distributed Monday by the Kremlin said this year’s BRICS meeting has been themed “Strengthening Multilateralism for Just Global Development and Security.”
“During meetings held in both restricted and expanded formats, the BRICS leaders will exchange views on pressing issues on the global and regional agenda. They will discuss the three main pillars of cooperation identified by the Russian chairmanship: politics and security, the economy and finance and cultural and humanitarian ties,” the press release states.
One of the main items to be discussed by members is the expansion of the alliance to include “partner nations,” of which Putin has said many have shown interest in at least partially aligning with the group.
Representatives from nearly 40 countries will attend the final day of the summit, Thursday, to participate in a BRICS Plus/Outreach meeting that will include discussions on pressing international issues with a particular focus on the escalating situation in the Middle East and interactions between the BRICS and the global south, the press release states.
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