Russia’s return to the gold standard

Putin and Trump

Kremlin spokesperson Dmitry Peskov clarified that BRICS, of which Russia is a member, was not considering the creation of a new currency, dismissing a renewed threat from US President Donald Trump to impose 100% tariffs on the BRICS nations if they were to establish their own currency and dump the US dollar.

"There are no talks about establishing a common BRICS currency. Such discussions have not taken place and are not taking place now. Instead, BRICS is focused on developing new joint investment platforms to facilitate mutual investments and projects in third countries," Peskov told a press briefing in Moscow. “Maybe someone should explain this to Trump,” he added

Indian Foreign Ministry spokesperson Randhir Jaiswal also downplayed Trump’s threats, saying, “As far as the dollar is concerned, the question of de-dollarisation, our foreign minister has clearly said that we don’t have such a policy or such a strategy.” 

So, what is the solution?  What are the alternatives for Russia? A return to the gold standard?

The mock-up bill that sparked excitement at the BRICS summit in Russia in October 2024 reflects growing interest in alternatives to the US dollar, but it also highlights the significant hurdles in achieving this goal. For now, leaders, even Putin, appear to be more focusing on strengthening existing financial systems while exploring the creation of a new digital currency, backed by gold. While a formal BRICS currency may be delayed, a potential new BRICS digital currency could allow the bloc to bypass Western financial networks, offering a new way to conduct trade without relying on the US dollar. Bingo – this is music to Putin’s ears!!!

Currently, no countries operate on a pure gold standard after the US led the global shift toward a fiat-currency system. That means no government directly pegs physical gold to its currency's daily valuation or exchange rate on a fixed basis. This once-universal economic system has been replaced by a fiat currency experiment. Without tangible backing, paper money derives value from governmental strength, economic stability, and consumer confidence. The shift to a free-floating fiat system allows for more flexible monetary policies and unimpeded growth but also introduces the risk of overspending which leads to inflation, currency devaluation, and economic weakness.

However, the majority of governments hold significant gold reserves to protect their economies from the risks of a paper-based system. Many are calling for the return to the gold standard, and, like Putin, are hoarding gold.

The countries that maintain the highest levels of gold reserves can be said to maintain a gold standard to a certain degree. The top 10 countries by the official physical gold holdings are:

1. United States — 8,133 Tonnes

2. Germany — 3,353 Tonnes

3. Italy — 2,452 Tonnes

4. France — 2,437 Tonnes

5. Russia — 2,333 Tonnes (add 4000 tonnes from Sukhoi Log – propelling Russia to No. 2)

6. China — 2,192 Tonnes

7. Switzerland — 1,040 Tonnes

8. India- 876 Tonnes 

9. Japan- 846 Tonnes

10. Netherlands — 612 Tonnes

Putin on his pile of gold.

Prompted by severe economic sanctions and a deep-seated hatred for the US-led global economy, Russia and China are increasingly basing their economies on gold for increased independence, flexibility, and stability. These developments underscore the world’s fundamental distrust of a fully paper-backed system and the beginning of a financial power struggle.

It’s impossible to predict whether the US will return to the gold standard in the future. However, it is guaranteed that the economic volatility and instability prompted by the fiat currency system will get worse. US debt is out of control, inflation is entrenched, the dollar is devalued, and global economies are decoupling from US influence. These serious economic challenges are prompting a modern-day gold rush among investors as people seek protection in physical precious metals.

References:

Article - “After Trump renews tariff threat, Russia, India say no plan for common BRICS currency”, The Indian Express by Express Web Desk, 8 February 2025

https://indianexpress.com/article/world/donald-trump-threatens-brics-common-currency-russia-india-react-9810292/