The BRICS alliance is looking to launch a new currency tied to gold along with a basket of local currencies. Backing the new currency with gold will help to end dependency on the US dollar and tying it with a basket of local currencies will boost the native tenders of emerging economies. While developing nations stand to gain from the development, the US economy and the dollar will be beaten.
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The US dollar runs on the supply and demand mechanism, and if it gains no demand in the global market, the USD will face deficits. BRICS could equip its new currency with gold and a basket of local currencies and advance without the US dollar. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade.
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BRICS Currency: Gold & Basket of Local Currencies
According to a report, BRICS is working towards a new currency tied to gold and a basket of local currencies. The new BRICS currency will consist of a backing of 40% gold and 60% tied to baskets of local currencies. The regional currencies could involve the Chinese yuan, Russian ruble, and Indian rupee, among other member’s legal tenders.
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If the BRICS currency gets backed by gold, the prices of the precious metal could skyrocket further in the charts. BRICS is the biggest buyer of gold since 2022 accumulating tonnes of the precious metal, reported the World Gold Council. This adds severe pressure on the US dollar as the global financial dynamics could change rapidly.
Developing nations could have a say in the global markets leaving the US and the West being sidelined. If the BRICS currency backed by gold becomes a success, many other developing nations could accept it for trade settlements. The currency could dominate the supply and demand mechanism, sending the US dollar on the path of a decline.