At the time of writing, there is no real alternative to the dollar, but an increasing number of countries are expressing their desire to reduce their dependence on it. For this reason, various nations are taking steps to conduct trade in currencies other than the dollar.
 
Some countries have already agreed to conduct their bilateral trade in a different currency. The BRICS nations are now exploring the possibility of expanding this into a multilateral system backed by gold.
 
The BRICS nations consist of Brazil, Russia, India, China, and South Africa.
 
This initiative aims to create a fairer global fiat monetary system from the perspective of the BRICS nations.
 

Russia

Last week, the Russian Embassy in Kenya stated that "the BRICS countries plan to introduce a new trade currency, which will be backed by gold."
 
While claims from Russian sources often invite skepticism, independent analysts expect the BRICS countries to continue their de-dollarization efforts, with gold playing a significant role in the process.
 
Russia has already been excluded from international trade due to sanctions imposed after its invasion of Ukraine. Wealthy Russians’ foreign currency holdings have been frozen, and Russia has been removed from the SWIFT international payment system. As a result, the country urgently needs an alternative currency for trading with other nations. However, given the uncertain situation caused by the war, many of these nations are reluctant to adopt the Russian ruble.
 
The global community observed how Russian assets were frozen, setting a concerning precedent. Consequently, there is a growing trend among countries to store their gold reserves within their own borders.
 

Bretton Woods

The Bretton Woods system was a financial-economic agreement reached in 1944 between 44 countries, signed in Bretton Woods, New Hampshire, USA.
 
The system introduced a regime of fixed exchange rates. Uniquely, only the dollar could be exchanged for a fixed amount of gold with the U.S. Federal Reserve. All other currencies were pegged to the dollar but could not be directly converted into gold. Indirectly, this system reinstated the gold standard.
 
Bretton Woods was introduced after World War II to ensure stability, but it came with drawbacks. The money supply was tied to gold reserves, limiting economic flexibility. To increase the money supply and encourage consumption, gold reserves had to be expanded first. Additionally, each currency’s value was fixed in gold, preventing countries from adjusting their local currency to meet economic changes. Lastly, the money supply could only grow as fast as gold reserves, meaning economic growth was similarly constrained. Gold mining is a slow process, which in turn slowed economic growth. As a result, currencies under the gold standard were prone to deflation.
 

A Digital Currency

In August of this year, the BRICS nations are scheduled to meet. According to some rumors, the group is expected to make a significant announcement: the launch of a gold-backed digital currency. This could have profound implications for the global payment landscape.
 
The new currency aims to increase the financial independence of the BRICS nations and reduce reliance on existing monetary systems, particularly the U.S. dollar.
 
This currency has the potential to strengthen economic ties within the BRICS bloc, encourage investment, and foster growth. In turn, this could boost trade and cooperation, potentially benefiting the global economy as a whole.
 
It may also trigger a de-dollarization process, gradually displacing the U.S. dollar as the dominant international trade currency. Over the past year, Russia, China, and Brazil have increasingly used non-dollar currencies for cross-border transactions. Iraq, Saudi Arabia, and the United Arab Emirates are actively exploring alternatives to the dollar. Additionally, central banks are shifting more of their currency reserves away from the dollar and into gold.
 
Despite this emerging trend, the dollar currently faces little immediate threat. While more countries around the world are moving away from the dollar, it still accounts for approximately 90% of global trade.
 

Gold Purchases

In economically uncertain times, more people are turning to physical gold as an investment. One of the main reasons for this is that gold (and silver) cannot collapse like fiat currencies can. For example, during the last financial crisis, concerns arose over the stability of the euro, and similar concerns now surround the dollar's status as the world’s reserve currency.
 
During the last financial crisis, significant amounts of money were invested in gold because it was seen as a reliable asset that could be converted into another currency if the euro were to collapse. Central banks also tend to purchase additional gold during financial crises to strengthen their domestic currency in turbulent times. Recent developments show that gold continues to play a key role in central bank reserve management, particularly during periods of market uncertainty and volatility.
 
In 2022 and early 2023, central banks set records for gold purchases as protection against high inflation and as a safe haven. China and Turkey accounted for nearly one-fifth of global gold purchases, while Singapore, India, and countries in the Middle East also made significant acquisitions. The amount of gold purchased by central banks in 2022 was the highest in over a decade. The first quarter of 2023 also showed strong demand, with central banks continuing to buy gold at a record pace.
 
Additionally, a survey by investment specialist Invesco revealed that 68% of central banks now keep their reserves domestically, compared to 50% in 2020. This figure is expected to rise to 74% by 2028. Central banks also show a preference for physical gold over derivatives or ETFs.
 
At The Silver Mountain, we offer physical gold and silver at the most competitive prices in the Netherlands. We sell coins and bars, often available directly from stock. Our prices are based on the current gold and silver rates. Lastly, we offer a buyback guarantee, meaning you can easily sell your precious metals back to us at fixed formulas relative to the prevailing gold and silver prices.
 
Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be considered as such. Past performance is no guarantee of future results.