Is Gold accumulation trend by BRICS countries signaling incoming crisis?

As gold trades at historical highs, a new trend is emerging where the five largest BRICS nations (Brazil, Russia, India, China, and South Africa) are accumulating the precious metal at an accelerated rate, raising questions about the true implications.

To put this accumulation in perspective, while these countries have seen a surge in gold reserves in 2024, the cumulative reserves by other global central banks have experienced a decline, according to data shared by TrendSpider on October 15.

Brazil is leading the gold rush, with its reserves index close to 300 above 2018 levels by 2024. India and Russia have also steadily increased their holdings, with indices around 200 and 180, respectively.

Elsewhere, China’s reserves index has increased by approximately 180 over the past six years, while South Africa’s has shown a moderate but noticeable rise to nearly 150. The same momentum is evident among other prospective BRICS members, such as Egypt and Saudi Arabia.

Implication of BRICS members’ gold accumulation 

The exact reason for this unprecedented accumulation cannot be pinpointed. However, amid the uncertainty in the global economy, gold could assume its historical role of serving as a hedge in tough conditions. 

Additionally, the yellow metal also acts as a hedge against fluctuations in the value of the U.S. dollar, a currency the BRICS are currently discouraging, with the countries working towards developing an alternative payment system. Notably, reducing reliance on the dollar has emerged as one of the key focus areas for BRICS member states. 

Interestingly, the accumulation warrants attention, considering that the prevailing economic conditions are bearish for gold’s growth. For instance, with gold gaining by almost 30% in 2024, bond prices have declined, and the U.S. dollar is experiencing a significant rally. Historically, a combination of these metrics has been a bearish environment for the metal. 

Therefore, it can assumed that the demand for gold could be driven by factors beyond traditional financial metrics, possibly indicating underlying concerns about the stability of the global economy. In this regard, a section of the market believes that gold’s rally in 2024 might signal a potential black swan event, such as an upcoming market downturn.

Similarly, as reported by Finbold, investor and financial author Robert Kiyosaki warned that the metal’s rally might not necessarily be a good sign for the general economy. Kiyosaki believes the momentum signals pessimism among investors.

Gold price analysis 

At press time, gold was consolidating, trading at $2,654, with daily gains of about 0.2%.

In line with this price movement, an analysis shared by Gold Predictors in an X post on October 14 suggested that following the metal’s recent correction to $2,604, gold is now supported by a wedge pattern, indicating that further bullish momentum could be building.

According to the experts, the price drop allowed gold to regain strength, and technical indicators pointed toward a potential upward breakout.

Therefore, a breakout above the current consolidation range could see prices rise, with the next target at $2,700 en route to the coveted $3,000 level.