REALITY-CHECK: Is the Gold Held by BRICS Central Banks 99.99% Pure?
There are central banks—particularly in closed or semi-closed economies—that are willing to purchase sub-investment-grade gold, sometimes as low as ~80% purity, often sourced from parts of Africa or other opaque supply chains. That gold is then booked as tonnage/kgs, not adjusted for purity in any economically meaningful way.
On paper, a ton is a ton. In practice, it’s not.
This creates a quiet but serious credibility gap.
A balance sheet that reports “gold reserves” without consistently marking purity, provenance, and deliverability is not equivalent to one holding LBMA-grade bullion.
The difference isn’t cosmetic—it’s the difference between a reserve asset that can clear globally and one that cannot.
That’s why the idea of “backing a currency with gold” is far more fragile than it sounds. If fractional reserve banking makes people uneasy because claims exceed high-quality collateral, then a currency implicitly backed by unverified, heterogeneous, or low-purity gold is worse. It’s not fractional—it’s unpeered. There’s no common standard, no universal auditability, and no guarantee that what sits on the balance sheet would be accepted at par outside the issuing system.
In closed economies, this may not matter day to day.
Capital controls mute the signal.
But the moment a currency tries to project credibility outward—through trade settlement, reserves, or geopolitical signaling—the weakness shows up immediately. Gold that can’t be mobilized, swapped, or cleared at full value is not a foundation. It’s a narrative prop.
This is why gold-backed currency stories keep resurfacing and then quietly fading. The constraint isn’t ideology; it’s accounting reality. Until purity, standardization, and transparency are non-negotiable, gold remains a reserve symbolmore than a reserve mechanism in much of the world.
And once you see that, you realize the real issue isn’t whether a currency is “backed.”