One of the biggest developments that will occur with the new BRICS Bank is the promotion of the 5 countries to conduct trade in their own currencies, avoiding the USD as the Global reserve currency.
The leaders of BRICs nations and other emerging market nations have adopted the plan of conducting trade between the 5 nations in their own currencies, 2 agreements, signed among the development banks of Brazil, Russia, India, China and South Africa, say that local currency loans will be made available for trade between these countries only.
Trading in local currencies will also allow the BRICS to hedge their foreign exchange reserves against the uncertainties facing the USD and Euro.
Many countries are already hedging by purchasing Gold. According to the latest data from the World Gold Council, central banks purchased a net total of 440 tons of Gold in Y 2011, compared to just 77 tons in the prior year.
That was the largest amount of net purchases by central banks since Y 1964.
Russia was a large buyer of Gold, adding around 95 tons in Y 2011. China is believe to have bought 500 tons of Gold last year. In Y 2009, the People's Bank of China (PBOC) confirmed that it had nearly doubled its Gold reserves since Y 2004, after secretly purchasing significant amounts of the precious Yellow metal.
With emerging markets increasing the use of local currencies and Gold holdings, the possibility is now that some currencies may have some form of a Gold peg or Standard.
As the BRICS and other countries raise concerns about the currencies of developed nations such as the US and EU, it is hard to imagine that Gold will not have a larger role in International trade.
The US Federal Reserve's current Zero interest rate policy is hurting the Greenback and future quantitative easing (QE) programs will only add to the downward pressure IMO.
The Greek debt tragedy is coming back into focus. It was reported Monday that investors in Greek bonds issued under foreign law did not accept recently made restructuring attempts.
The closest maturity date on the international bonds is 15 May, when holders of a 450-M Euro floating rate note are due payments. Greece's inability to pay on the note could easily spark more EuroZone fears, adding even more allure to safe-havens such as Gold and Silver, + pressuring the USD further. Stay tuned...
Paul A. Ebeling, Jnr
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.