Rise of the BRICS countries and the influence on the gold price

Recently, several countries have been invited to join the BRICS bloc. These countries include Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia. As a result, attention has shifted to possible changes in the geopolitical and economic balance. While this development may have broader implications, in this article, we look at the potential impact on the gold price. We examine how the rise of the BRICS countries and the idea of developing a common currency linked to gold could influence the demand and price of gold.
 

The BRICS Countries

The BRICS countries currently consist of Brazil, Russia, India, China, and South Africa. Together, these countries already account for a significant share of the world’s population and economy. With the addition of new members, this share could increase considerably.
 

Shifts in the Oil and Gold Markets

One significant shift could occur in the control over global oil production. Currently, the BRICS countries control about 20% of global oil production. If Saudi Arabia, the United Arab Emirates, and Iran join, this percentage could rise to at least 42%. Oil production figures are important because oil and gold often go hand in hand in terms of their influence on financial markets.
The BRICS countries aim to create a BRICS currency and link it to gold. They no longer want to be dependent on the dollar, which has disproportionate power along with the country behind it—the United States. The announcement of this news has led to speculation about the potential role of gold in such a scenario. Historically, gold is seen as a safe haven in times of economic uncertainty and geopolitical tensions. With the current plan on the table, the BRICS countries will have greater influence on the global market, potentially increasing demand for gold.
 

Central Banks and Their Gold Reserves

Analysts have noted that central banks, particularly those of countries east of Germany, have acquired significant amounts of physical gold. This accumulation suggests that there is confidence in gold as a tool to support the financial system in the event of unexpected changes. Experts have speculated that if one of the BRICS countries uses gold to back a new currency, it could significantly affect the gold price.
 

Impact on Gold Price

Although future developments are uncertain, several indicators point to possible changes in the global financial system. If the BRICS bloc continues to grow stronger and more countries join, it could disrupt traditional economic power relations. A greater role for BRICS in the global economy could increase the demand for commodities such as oil and gold, potentially leading to price increases.
In light of these developments, it is important for investors and market observers to closely monitor the situation and analyze the potential implications for the gold price. While nothing is certain, the growing influence of BRICS countries and the possible shift towards a joint commodity-based currency could increase demand for gold and ultimately drive up its price.
 
Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be considered as such. Past results are not guarantees for the future.