BRICS Bets Against the Buck

Long anchored by the US dollar, the global financial system is facing a profound shift. BRICS nations—Brazil, Russia, India, China, South Africa, and their growing cohort—are steadily distancing themselves from dollar-centric mechanisms, including US debt and Treasury securities, while forging new trade and settlement frameworks. Central to this realignment is gold, both as a reserve asset and a symbol of financial sovereignty. As these nations accumulate and repatriate gold at unprecedented rates, the West risks misreading critical signals that BRICS is constructing viable alternatives to the current order.

Underpinned by US economic dominance and military power, the dollar’s primacy, rooted in the 1944 Bretton Woods system, rests on its role as the world’s reserve currency. However, the abandonment of the gold standard in 1971 transformed the dollar into a fiat currency, its value tied to confidence in US institutions. Today, that confidence is under strain. US federal debt exceeds US$36 trillion and is climbing, with interest payments projected to surpass US$1 trillion annually by 2030. Sanctions on Russia and asset freezes targeting ‘adversarial’ states, have exposed the dollar’s vulnerability as a tool of coercion. For BRICS nations, these developments underscore the risks of over-reliance on a weaponised currency and its associated debt instruments.

Gold is a cornerstone of the BRICS’ response. Central banks across the bloc are aggressively accumulating gold - with global purchases reaching 1,037 tons in 2023, nearly 60% by BRICS states. China’s reserves were at 2,310 tons by mid-2024, while Russia and India have each added over 500 tons since 2015. Poland and Hungary, though not BRICS members, reflect a broader trend of repatriating gold to hedge against the systemic risks of the dollar. Unlike US Treasuries, BRICS holdings have stagnated at around US$3 trillion since 2018, gold is immune to default risk and sanctions, offering a physical counterweight to dollar volatility. This accumulation signals a strategic shift toward assets that preserve value amid geopolitical uneasiness.

Parallel to gold stockpiling, BRICS nations are innovating trade and settlement systems to bypass dollar dominance. Bilateral agreements now facilitate trade in local currencies: China and Brazil settle over 25% of their US$150 billion annual trade in yuan and reais, while India and Russia use Rupees and Rubles for energy deals. The BRICS Pay initiative, unveiled at the 2024 Kazan Summit, leverages blockchain to enable cross-border payments in local currencies, potentially stabilised by gold or digital assets. Proposals for a BRICS Clear system aim to rival SWIFT, reducing exposure to Western financial chokeholds. These mechanisms challenge the dollar’s 88% share of global transactions, as reported by the Bank for International Settlements in 2024.

Gold’s role extends beyond reserves to conceptual frameworks - discussions of a BRICS ‘unit of account’ - a trade-weighted basket of member currencies, possibly backed by gold - suggest BRICS is diversifying and laying the groundwork for a new and unprecedented financial architecture. Such a unit could anchor trade within the BRICS nations, insulating them from dollar fluctuations. Russia’s advocacy for gold-linked digital tokens reflects a broader ambition to merge traditional assets with modern technology towards financial sovereignty.

Are Trump and the West underestimating these developments? US policymakers routinely dismiss BRICS initiatives, citing the dollar’s liquidity, the depth of American markets, and internal BRICS divisions. Yet BRICS’ expansion to include Egypt, Iran, and the UAE now encompasses more than 3.5 billion people and a massive 36% of global GDP. The West misreads gold’s resurgence as a mere precaution, ignoring its symbolic and practical weight in signalling the massive distrust of US debt sustainability. Similarly, Saudi Arabia’s openness to yuan-based oil sales as well as the proliferation of other non-dollar trade agreements - challenges the petrodollar’s foundation, the basis of dollar authority since the 1970s.

What is being missed? First, the scale of gold accumulation reflects a long-term bet against dollar stability. Second, advancements in payment systems lower barriers to de-dollarisation, making alternatives viable. Third, BRICS’ focus on local currencies and gold-backed instruments prioritises resilience over rivalry, a game plan the West grossly underestimates. Finally, the bloc’s growing economic clout amplifies its ability to reshape norms, as seen in its push for IMF and World Bank reforms.

The implications here are profound. A fragmented currency landscape could potentially erode US sanction leverage, increase borrowing costs, and destabilise domestic markets if dollar demand continues its decline. For BRICS, gold is both a shield and spear - the hedge against volatility and a tool to carve out financial independence. The West must recognise that BRICS’ quiet revolution, grounded in innovation and built with gold as its foundation, is not a direct assault but a slow and patient reconfiguration of global finance. Ignoring these signals risks renouncing influence in a world where the dollar’s reign is no longer assured.