The BRICS Alliance, despite all of its efforts to rival the United States economically, still does not measure up. One of the ways for the BRICS Alliance to be able to compete with the United States economically was to create a monetary system based on gold reserves. However, according to the World Gold Council, the United States has more gold reserves than all BRICS countries combined.
Indeed, as of September 28, 2023, the World Gold Council confirmed that the United States has 8,133.5 tonnes of gold reserves. The combined gold reserves of the BRICS countries (Brazil, Russia, India, China, and South Africa) are 5,136.3 tonnes. This means that the United States has about 60% more gold reserves than the BRICS countries combined. Before understanding why the U.S. is outpacing BRICS in gold reserves, it is essential to comprehend how gold reserves work.
Gold reserves work in several ways. They could be used as a store of value. Indeed, gold is a valuable commodity that has been prized for centuries. It is seen as a safe haven asset, meaning that its value is likely to hold steady or even increase during times of economic turmoil. Central banks hold gold reserves as a store of value and to back their currencies.
Gold could also be used as backing currency. In the past, many countries used the gold standard, which meant that their currencies were backed by gold. This meant that central banks were required to hold a certain amount of gold for every unit of currency that they issued. Today, no country uses the gold standard, but many central banks still hold gold reserves to back their currencies and to maintain confidence in their economies.
Gold could also be used for international trade as central banks could buy and sell gold to other central banks and to private investors. This helps stabilizing the value of their currencies and to manage their foreign exchange reserves. Gold is also known to be used as an hedge against inflation and to diversify asset portfolio.
There are a few reasons for this difference. First, the United States has been accumulating gold reserves for over a century, while the BRICS countries have only relatively recently begun to increase their gold holdings. Second, the United States is a much larger and more developed economy than the BRICS countries, and it can afford to hold a larger share of its reserves in gold.
The US dollar is the world's reserve currency, meaning that it is used in more international transactions than any other currency. This gives the United States a number of advantages, including the ability to borrow money at lower interest rates and to influence the global economy.
In addition to these factors, the United States has also benefited from a number of specific events that have helped to increase its gold reserves. For example, in the early 1930s, the United States government required all private citizens to turn in their gold holdings in exchange for paper money. This helped to increase the US government's gold reserves by over 600 million ounces.
The United States' large gold reserves give it a number of advantages. For example, gold can be used to back the US dollar and to support the US financial system. Gold can also be used to diversify the US investment portfolio and to hedge against inflation.
However, it is important to note that gold reserves are just one factor that contributes to a country's economic strength. Other factors, such as GDP growth, unemployment, and inflation, are also important.