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Gold-backed BRICS currency off the agenda for now, but bloc expansion will jeopardize petrodollar - Lobo Tiggre

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(Kitco News) - A new BRICS currency probably isn’t going to be announced in the near term, but recent geopolitical events make a gold-backed alternative to the U.S. dollar more attractive to the bloc, according to Lobo Tiggre, Editor of The Independent Speculator.

Tiggre joined Kitco News’ Lead Anchor and Editor-in-Chief Michelle Makori to discuss the prospects for a gold-backed BRICS currency and its potential impact on the U.S. dollar.

Tiggre said he believes the statements from Anil Sooklal, the South African ambassador to BRICS. “There's never been talk of a BRICS currency, it's not on the agenda” for the August summit in Johannesburg, Sooklal said during a media briefing last week. “If the people hosting the conference were telling you this is not on the agenda, I think that is not too much of a stretch to take that at face value,” Tiggre said.

India’s apparent shift in sentiment against a bloc currency is a bigger hurdle. “The Indian statement in a way is a bigger shocker,” he said. “The South African ambassador, he's just saying it's not on the agenda. [India] said they don't favor a BRICS currency at all, so they still need persuading even to get in that boat. That's a bigger hurdle to come up against.”

He said it’s not surprising that Russia is pushing hard for a BRICS alternative to U.S. dollar dominance and that Russia’s attempts to create the impression that the new currency was imminent also served their purposes. “Even just talking about it, propaganda has all kinds of value in a war setting, so it's easy to see an interest on their part in pushing an idea that would do any harm to their enemies, no matter how much or how little,” he said. “Words are cheap. It's easy to talk.”

“This is a country at war,” Tiggre said. “This is a country that, if not at war directly with the West, got smacked down when the dollar was so-called ‘weaponized.’ So, of course, they have an incentive.”

Despite the development that a gold-backed joint currency is off the agenda for now, Tiggre supports the idea conceptually. “I think what gives this idea so much power, and why it grabs so many people, is because it actually does make sense … and the gold-backed part even makes sense.”

“It's an idea that they are clearly considering, even if it's not on the agenda for this meeting.” For Tiggre’s thoughts on what this means for the price of gold, watch the video above.

New BRICS members

Tiggre said that the U.S. government’s decision to lock Russia out of the SWIFT banking system and prevent Moscow from using the dollar for trade has created new incentives for countries to join BRICS. At least 20 counties have formally applied to join, and the expansion of the bloc will be discussed at the upcoming summit.

Tiggre said that countries like Turkey and Saudi Arabia joining the block would have a major impact on global trade. “The Saudis joining the block and perhaps helping to encourage trading outside and away from the dollar is a big deal,” said Tiggre, noting that this would be particularly significant if trade in oil is no longer done in dollars, thereby shattering the foundations of the petrodollar.

Saudi Arabia joining BRICS would be “a watershed event,” he said. “I think if we wake up and Saudi Arabia joins the BRICS alliance, the world would be a different world in a meaningful and significant way.”

Tiggre said Turkey also seems like a natural fit for BRICS membership. “It's a big country, a lot of Americans aren't aware of how big it is, and how big a part it plays in natural resources and other parts of markets,” he said. “It's on Europe's flank, it's a NATO member. That's a big deal.”

U.S. economy is in recession

Turning to the U.S. economy, Tiggre said that he believes the “apparent victory of ‘Team Soft Landing’” is illusory, and he’s sticking with his forecast for a recession.

“I'm actually doubling down,” he said. “I think we're in a recession now. I think it's been masked by the post-covid distortions. We had one-offs, once-in-a-century scale events. And amongst other things, this has resulted in labor hoarding, which has caused the labor market to look stronger than it is. But we also know that there's more people working multiple part-time jobs.”

He said he expects the U.S. economic situation to become untenable. “I think it disintegrates by itself, even if nothing big happens by the end of this year,” he said. “I think we'll see the labor market crack in such a way that people start stepping back and say ‘Whoa, something big is happening here.’”

He also believes there's a good chance that the Fed will break something else. “What we saw with the regional banks was just the overture,” he said. “I think the odds are that that's already happening, and in the months ahead, there will be headlines about the next thing the Fed broke, and we'll see big changes.

Tiggre maintains that in this environment there is one asset that stands to outperform. To find out what that is and why, watch the video above.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.