Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Russia and China have hit a crucial milestone in trying to break free from the US dollar by conducting 90% of trade in local currencies. This development deals a serious blow to the stability of the world economy and the greenback upon which it rests. This economic upheaval is pushing countries and investors into gold and other precious metals.
The Numbers
- More than 90% of trade between Russia and China is completed in rubles and yuan.
- At the start of 2024, President Biden slapped Moscow with 500 new sanctions.
- Russia holds over 2,299/oz of gold reserves.
- China’s gold reserves exceed 2,000 tons, following 18 months of gold buying.
- Collectively, the BRICS nations account for 16% of gold reserves.
- Central bank gold demand broke records in the first half of 2024.
Why Investors Should Care
The rising share of local currencies in Russia-China bilateral trade shows that de-dollarization continues apace. This breakthrough also signals to all countries that economic stability without the greenback is achievable and viable. Every step away from a dollar-dominant economy means a weaker currency, slower economic growth, higher inflation, and diminished buying power for American investors.
Market Impact
The US dollar became the world reserve currency following the abandonment of the gold standard. Now, a slew of countries — primarily the BRICS nations — are challenging the greenback’s status. A crippling combination of rampant national debt, irresponsible fiscal policies, and the weaponization of the dollar is motivating governments to ditch the dollar. The severe reduction of USD in Russia-China trade shakes the foundation of the dollar and, in turn, the global economy. The flip side of the dollar dump is a modern-day gold rush as central banks top up their reserves as market uncertainty mounts.
Expert Insights
“There has been a concerted move by the BRICS countries to become more independent in international trade…away from the US dollar towards their own currencies and gold,” explains Tim Murphy, Precious Metals Advisor at Scottsdale Bullion & Coin.
As the biggest economy in BRICS, China is often seen as the economic group’s ringleader. Underscoring the country’s true motivation, fellow SBC Precious Metals Advisor John Karow explains, “China…wants the Yuan to be broken free of the dollar.”
An analysis of Russia-China trade policy by the Atlantic Council came to a similar conclusion, saying “Beijing has a longer-term goal of competing with the dollar and of advancing the yuan as an international currency.”
Unfortunately, America’s economic incompetence and weakening geopolitical muscle have contributed to the problem. Karow continues, “The US government…has opened the door for China, and they’ve walked right through.”
What’s Behind the News?
The concerted effort between Russia and China to snub the US dollar has been years in the making. Both countries have been subject to constrictive sanctions, spurring an attempt to circumnavigate Western influence. This largely successful endeavor has caught the attention of dozens of nations who want more economic independence. The BRICS consortium is a direct reflection of this shift.
Future Outlook
Looking ahead, the de-dollarization trend is likely to continue as countries — US friends and foes alike — pursue economic autonomy. The BRICS group is adding new members with dozens eager to join. The World Gold Council expects central banks’ gold demand to carry on, which is expected to push prices even higher. In fact, many experts are increasing their gold price predictions.
Actionable Takeaways
- Diversify Your Portfolio — Consider increasing your allocation to gold and silver to hedge against dollar devaluation and economic uncertainty.
- Monitor Global Trends — Keep an eye out for major developments that could impact the dollar’s strength and the world economy.
- Consult With an Expert — Talk with an advisor to determine which precious metals investment strategy aligns with your goals and current market conditions.
Want to Learn More About Gold?
The precious metals advisors at SBC Gold are happy to answer all your questions. You’ll get personalized advice to meet your unique goals and needs. Contact us today by calling toll-free at 1-888-812-9892 or using our live chat function.