According to reports from state-run RT, the Russian government has reportedly confirmed that the BRICS nations, comprising Brazil, Russia, India, China, and South Africa, are planning to introduce a trading currency backed by gold. This development is anticipated to be officially announced during the upcoming BRICS summit scheduled for August in South Africa. The gold market could potentially witness a surge in bullish momentum as the world potentially moves towards a new form of gold standard, as per the information provided.

The latest development will provide fresh impetus to the ongoing de-dollarization trend unfolding in the global economy. Central banks worldwide have been actively purchasing gold since mid-2022 at an unprecedented rate, partly driven by a desire to diversify their reserves away from the U.S. dollar.

For numerous analysts, the introduction of a gold-backed currency represents the next phase in this progression. China's recent gold acquisitions, according to many analysts, have been interpreted as an effort to enhance international credibility for the yuan.

Simultaneously, the U.S. government's utilization of the U.S. dollar as a geopolitical tool against Russia in response to the Ukraine invasion has generated geopolitical uncertainties for some nations aligned with Russia.

While the anticipation of a gold-backed BRICS currency will provide substantial support for gold, several analysts believe that it will take time before its impact is truly felt in the market.

Thorsten Polleit, the chief economist at Degussa, acknowledged the announcement as a positive step but cautioned that significant progress is still needed before the concept becomes a reality.

"At first glance, a new transaction unit, backed by gold, sounds like good money – and it could be, first and foremost, a major challenge to the US dollar's hegemony," he said in an exclusive comment to Kitco News.

"For making the new currency as good as gold, a truly sound currency, it must be convertible into gold on demand. I am not sure whether this is what Brazil, Russia, India, China and South Africa have in mind," he said. "Using gold as money, the unit of account would be a true game changer, no doubt about it. It could lead to a sharp devaluation of many fiat currencies vis-à-vis the yellow metal (including the BRICS fiat currencies), and it could catapult up goods prices in terms of fiat currencies. It could be a shock to the global fiat money system. I am not sure that this is what the BRICS wish to achieve."

Polleit suggested an alternative approach where the BRICS nations could establish a new bank focused on financing foreign trade, which would mandate the holding of gold as capital.

"Against this gold stock, the new bank could say, grant financing loans to exporters, and issue the "new currency"; or BRICS exports will be sold against the "new currency" and/or gold," he said. "I think it is fair to say that it is early to come up with a final conclusion where this will lead us to – we need more details."

According to Naeem Aslam, the chief investment officer at Zaye Capital Markets, although the potential establishment of a gold-backed currency by the BRICS nations could offer long-term support for gold, the precious metal still confronts immediate hurdles. Aslam further stated that despite the announcement, the realization of a gold-backed currency is still a distant prospect for the world.

"But this doesn't mean this can't be achieved at all," he said. "For now, any additional positive news on this could certainly help the gold price, but more importantly, traders are now going to be focused on the US CPI data, which is due next week."

Other analysts remain highly doubtful about the announcement."Talk of BRICS gold-backed currency seems like an echo chamber. They do not have the gold to back a currency meaningfully," said Marc Chandler, managing director of Bannockburn Global Forex. "Have we not learned anything from the EMU experience of monetary union without fiscal union? Color me profoundly skeptical."

Analysts have been discussing the possibility of a new global currency to rival the U.S. dollar as the world's reserve currency. Jim O'Neill, former Goldman Sachs chief economist, highlighted in a published paper that the U.S. dollar's dominance is causing instability in global monetary policies. He suggested that a BRICS currency challenging the U.S. dollar's supremacy could bring stability to the global economy.

"Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic," he said.

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