Published 29 October 2024 at 08.59
Economy. Russia has proposed that the Brics countries should create their own marketplace for trading precious metals similar to the American commodity exchange Comex. The planned move is expected to upset the established international pricing mechanisms for gold, silver, platinum and other precious metals.
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The news comes shortly after the leaders of the BRICS countries on Wednesday adopted a declaration on increased exchange of precious metals between member countries based on common product quality standards.
On Thursday, Russia's Ministry of Finance made its own official statement.
“The creation of a metal trade mechanism within the Brics countries will lead to fair and equal competition based on stock market principles,” a press release from there said, according to the Russian news service Oreanda.
– The mechanism will include the creation of instruments for the pricing of metals, standards for the production and trade of ingots, accreditation of market participants, clearing and auditing within the BRICS countries, explained Russian Finance Minister Anton Siluanov.
– The participating countries will get a reliable and stable way to conduct trade within the cooperation.
The Treasury added that it expects the Brics marketplace “will become a major player in precious metals pricing”.
Gold-backed Brics currency
Andy Schectman, CEO and owner of Miles Franklin Precious Metals, told Kitco News in an interview that this week's Brics summit could accelerate a global financial transition that could lead to the re-establishment of gold as the most important world currency.
According to Schectman, such a new arrangement could lead to gold's value increasing to the equivalent of SEK 1.5 million per troy ounce, compared to today's price of just under SEK 30,000 per troy ounce.
Schectman's calculation is based on reports that show that the Brics countries plan to introduce a new global currency system, which goes by the working name “unit”.
According to a fact sheet, the price of a “unit” would be 40 percent tied to the value of gold and 60 percent be tied to a basket of Brics countries' national currencies.
The currency is designed as an “apolitical currency”, as a consequence of the concerns of the Brics countries about how the US is using the position of the US dollar as a world currency for political purposes.
– Let's call it an acceleration of this de-dollarization process, and a transition to a new system, Schectman told Kitco, adding:
– If we don't act first, the most likely outcome is that someone else will remove the incentive to own US dollars or Treasuries.
The Brics countries, along with other central banks globally, have been buying up record stocks of gold in recent years. In addition, central banks around the world have begun to return gold to their own countries for storage. The Riksbank, which has done none of this, is almost an exception.
Germany, Austria, Slovakia, Argentina, Netherlands, Saudi Arabia, Hungary, Belgium, Egypt, Senegal, Romania, Nigeria. Poland, Ghana, India, Turkey, France, Serbia, Venezuela, Algeria, Cameroon and South Africa are some examples, according to Schectman.
– The accepted truth is that this is because the government debt market has been politicized. That's probably part of the explanation, but if you take a closer look at the plans for the proposed trade currency “Unity”, it mentions that countries could coin this new currency using whatever gold they have within their borders.
Schectman described four scenarios for how this potential global financial transition could take place, and one scenario involving a revaluation of gold.
One of them assumes that the United States has 8,000 tons of gold in its possession, just as it is stated in the American national accounts. According to Schectman, in order for assets to equal liabilities and equity, gold needs to be revalued in such a scenario.
– If you set the price of gold at $150,000 per ounce, it may sound crazy, but your balance sheet is now flawless.
He believes the US will issue a new currency, a central bank-backed cryptocurrency (CBDC) backed by gold, if the worst happens and the US dollar loses its position as the world currency. In such a hypothetical scenario, most things become cheap – for whoever owns gold.
– The over-leveraged and under-capitalized banks, the insurance companies, the property market, the bond market and the stock market all collapse at the same time. Then you issue a new CBDC tied to gold, and there you are.
– Gold will reach a level that no one thinks is possible, and it will be tied to a new system and never come back down.< /p>