Official Gold Currency Announced by BRICS; Bitcoin Soars Yet Again

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Last Updated on: 12th July 2023, 04:57 pm

There’s talk that we’re in a “rolling recession”—one where the effects of rate hikes move throughout industries according to their vulnerability to rate hikes. First, it was tech, venture capital, and regional banking. Now it may be coming for more of the economy, one industry at a time. 

Jobless claims are currently their highest since October 2021 after surging to 261,000. An S&P 500 report found that output is highly varied on a sector-by-sector basis, with deep production cuts occurring in Q1 2023 in financial services, basic materials, and consumer goods. 

This doesn’t bode well for the U.S. economy, whose economic growth has grinded to a near-standstill and who many expect will be hit by a recession later in the year. 

Market Snapshot: July 7, 2023

  • Inflation Rate: 4.0%
  • Fed Rate: 5.00% to 5.25%
  • Gold Price: US$1,916/oz.
  • Silver Price: $22.74/oz.
  • Bitcoin Price: US$30,122
  • Ethereum Price: US$1,860

Meanwhile, non-conventional assets are outperforming expectations. 

While Ethereum was stagnant through June, Bitcoin continued its blistering growth streak ending the month up 8.5% and now above the elusive $30,000 per token mark. The world’s largest cryptocurrency by volume is now up 80% on the year, which puts it on track for its strongest year since the bull run of 2020. 

Gold, however, largely stood its ground in the mid-1,900s throughout June. It appears that gold’s price stagnancy throughout June and much of Q1 2023 can be attributed to strong mine production during the quarter, with gold supply increasing by about 1% year-over-year in Q1. 

Yet, demand for gold is growing—especially among central bankers. For example, the People’s Bank of China continued its 7-month gold-buying spree into Q2 2023 by purchasing huge amounts of the yellow metal. In May alone, the Chinese central bank added 16 tons of gold to its ledger, bringing its official holdings to 2,092 tons. 

The true extent of China’s gold reserves, however, is still a matter of debate and could be as high as 30,000 tons.

But perhaps the biggest news this month is the long-awaited announcement of a gold-backed currency introduced by the BRICS countries. Although the details are still scarce, the Russian Deputy Foreign Minister announced that the common currency will be expanded to include countries from the Arab world and the Asia-Pacific region. 

The official introduction of an international reserve currency pegged to the price of gold marks a major milestone in the global de-dollarization movement. However, it’s still unclear whether the future currency will be exchangeable for gold or silver bullion upon demand. 

There’s a reason central banks the world over are loading up on gold. Not only is it a stable and shock-resistant store of value, but it a scarce and globally in-demand resource that is instrumental in the international effort to move away from the U.S. dollar. 

Forward-thinking investors may want to consider loading up on gold—that is, if there’s any left after central bankers get their share.

Liam Hunt
Liam Hunt

Liam Hunt, M.A., is a financial writer and analyst covering global finance, commodities, and millennial investing. His coverage has been featured in publications such as the New York Post, Forbes, and Barron's.

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