Can BRICS Create A Gold-Backed Currency?

From the long-awaited BRICS Summit in South Africa to an eye-popping 30-year mortgage rate of 7.49%, this week was a pivotal one for global finance and personal economics...

What do these shifts mean for the future of precious metals?

Let's dive in.

Warren Buffett Sells $8 Billion Worth Of Stock — According to Berkshire Hathaway's second-quarter earnings, released earlier this month, the company sold close to $13 billion worth of shares and bought less than $5 billion. As Buffett is considered one of the greatest investors of all time, many view this as a dark omen for the markets.  

U.S. Workers Now Expect $79K Salary To Start A New Job — New data from the Federal Reserve Bank of New York shows that American workers' minimum salary expectations have hit an all-time high of $78,645 as of July. This marks a notable jump from last year's figures, which hovered around $72,900 and $69,000 in July 2022.

Inflation Eases... But It’s Impact Lingers — While the scars of past inflation remain, there's been a significant decline this year. From 9.1% in June 2022 to 3.0% in June 2023, inflation (measured as CPI, year-over-year) is getting closer towards the Fed’s goal of 2.0%.

Total Gold Demand Up 18% In 2022 — The World Gold Council says 2022 was the strongest year for gold demand since 2011. Demand for gold has four main parts - investment, industrial, central banks, and jewelry. Of these, investment demand continues to be strong, providing resilience.

Gold & Silver: The Unsung Heroes Of Long-Term Investment — Many people may dismiss gold and silver as unexciting assets, but the numbers tell a different story. Since 1971, the price of gold has risen almost 43x in terms of U.S. dollars, while the price of silver has risen more than 16x.

If You’re Struggling To Afford A Home, You’re Not Alone

Buying a home has become an overwhelming challenge for many. According to the latest data from the National Association of Home Builders (NAHB), only 40.5% of homes sold in Q2 2023 were within reach for families earning a median income — defined as $96,300 based on standard mortgage criteria.

How does the NAHB measure ‘affordability’ here? They use the NAHB/Wells Fargo Housing Opportunity Index (HOI) which serves as the yardstick for this study. It calculates the percentage of homes sold in a given area that a family with the local median income could afford, based on standard mortgage underwriting criteria. The index assumes that a family can allocate 28% of its gross income to housing costs — a standard assumption in the lending industry.

Just three years ago, about two-thirds of homes were affordable for families earning the median income. But a combination of skyrocketing demand and limited supply has sent prices soaring, exacerbating the affordability crisis for countless Americans.

30-Year Mortgage Rates: Breaking Down The Numbers

The NAHB index considers three primary factors: home prices, mortgage rates, and incomes. While home prices have seen a slight dip from their 2022 peak, they remain high. The median price for homes sold in Q1 2023 stood at $388,000, a jump from $365,000 in the previous quarter. 

Mortgage rates are now playing a larger role in the affordability crisis. The average 30-year fixed mortgage rate hit 7.49% this week, Mortgage News Daily reports, the highest level in two decades.

When mortgage rates soar this high, the ripple effects are felt throughout the economy. High rates deter new home purchases and refinancing, leading to a slowdown in the housing market. This, in turn, impacts related industries like construction, home improvement, and even consumer spending, as homeowners have to deal with higher monthly payments.  

Additionally, high mortgage rates can worsen income inequality, as they tend to negatively affect first-time buyers and those without substantial assets more significantly. Add to this the rising construction costs, and you have a perfect storm that is making homeownership increasingly elusive for many Americans.

BRICS Summit In Johannesburg:  
The Next Chapter In A Global Power Shift?

As part of our ongoing coverage of the BRICS alliance, we're zooming in on the latest developments from their three-day summit in Johannesburg, which commenced this Tuesday. The leaders from the five-member group of nations — Brazil, Russia, India, China, and South Africa — are meeting to discuss several topics including the expansion of their alliance and creating a new currency.  

Fourteen years ago, when the BRICS alliance was first formed, few could have foreseen the global spotlight it commands today. But today the BRICS nations, which already represent 40 percent of the world’s population and a quarter of its economy. Now dozens of other countries have expressed interest in joining, including Argentina, Nigeria, Iran, Belarus, Saudi Arabia, and Indonesia.  

The Expansion Debate – Who’s In And Who’s Out?

During this week's summit, the leaders will make pivotal decisions about expanding the alliance. China, eager to continue amplifying its global influence, has been a vocal proponent of expansion. Russia, increasingly isolated due to its Ukraine conflict, is also likely to support the move. But the biggest advocate for expansion has been South Africa, inviting over 30 other African nations to join the BRICS Alliance.

But expansion is not a foregone conclusion. Some speculate that countries like Brazil and India, who have strong alliances among industrialized nations, could favor a more cautious approach to growth.

The BRICS Currency: A Threat To The U.S. Dollar?

One of the most interesting rumors circulating during the summit is the BRICS nations' idea to create a new currency, potentially backed by gold. The potential currency, while still under review and development, could challenge the U.S. dollar's hegemony, which currently dominates nearly 100% of oil trading and about 90% of all currency trading.

Should this new currency happen, it could significantly impact the demand for the U.S. dollar, with far-reaching implications for both the U.S. and the global economies.

The Story Continues...

What progress will the BRICS nations make during this summit? We'll have a clearer picture in the weeks ahead. Rest assured, we'll continue to follow this evolving story closely, analyzing the decisions made and their global repercussions.

We’ll pick back up with this ongoing story in next week’s Nuggets. Until next time!

Best,

Brandon S.
GoldSilver