BRICS of Gold Update
How BRICS buying will drive gold to $10,000 - $12,000 /oz
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*Not financial advice, merely pointing out political and macro trends*
New BRICS of gold
Summary
The BRICS nations, led by China, continue to accumulate gold at a rapid pace. They still have a long way to go to reach their target holding levels. After a pullback over the last six months, we think the gold bull market is about to resume. We first wrote about it at length three years ago, and the thesis has largely played out as we anticipated. We updated the thesis along the way in shorter pieces, now it’s time to do a more comprehensive overview.
In this piece we will go into why this diversification push is happening so emphatically. We will break down just how much more buying remains and how long this should take. We are going to look at the timing, which we believe is closely linked to the adoption of ‘The Unit’ by the BRICS
The Trade: Stay long precious metals until the BRICS diversification buying dries up, which is several years in the future.
The last 5% reserve shift by China doubled the gold price. As the BRICS move to the eventual target range of 40% of their FX reserves in gold, versus 15% currently, that should translate into a roughly $10,000-12,000 /oz gold price.
BRICS Buying and Diversification
Three years ago, we noted that all the BRICS nations were moving their reserves gradually from dollars and US Treasuries to gold. The weaponization of the US dollar and banking system had scared these countries to move into a neutral asset. The rash of sanctions and seizure of Russian’s foreign exchange reserves in 2022 further scared these nations and forced them to move to gold at a faster pace. The increasing political bad blood between the BRICS nations, especially China, and the Western financial system is not helping matters.
Russia was the trailblazer in this shift. They began moving into gold in the 2010’s. Over that decade, they had moved roughly 30% of their foreign exchange reserves into gold. If other BRICS nations followed suit, which was our hypothesis, the amount of buying would be enormous. Today gold is 45% of Russia’s overall reserves.
2023’s reserves and gold holdings:
NB: We used a $2,000 / oz gold price here to keep things simple
Updating this data to the most recent available, we can see that the increased buying and higher gold price have significantly increased BRICS’ gold holdings as a share of reserves:
2026’s reserves and gold holdings:
NB: We are using a $4,000 / oz gold price here to keep things simple
A few observations from this table as compared to three years ago:
1. The BRICS nations continue to run trade surpluses and increase their FX reserves, adding $500b in total
2. The BRICS nations are all adding to their gold holdings. China is the leader, adding 15% to their holdings, but India also boosted them by 10%.
3. Russia’s gold holdings are now 45% of their total reserves, up from 30% three years ago and single digits fifteen years ago. We guess that they are going to stop around here, near the 40% level set under the UNIT framework we discussed in our comprehensive BRICS piece
4. Obviously the big mover here is China, which doubled its gold holdings from 4.6% of reserves to 9.6%. That’s around 8.5m ounces of gold. That was enough buying to double the global gold price.
Gold’s Last Five Years
