Gold coins: RBZ to drip feed market

THE Reserve Bank of Zimbabwe will drip feed the market with gold coins to curb flooding the economy with the alternative store of value instrument, a senior central bank official said yesterday.

Last month, the monetary authority released the gold coins into the market to provide a store of value alternative to the United States dollar, mop up excess liquidity in the market and help stabilise the Zimbabwe dollar.

Excessive demand for the greenback due to the need to import goods as well as its other widespread use as a store of value currency has largely been blamed for fueling volatility of the local currency.

And the eventual knock-on effect of this strong demand has been driving the inflation resurgence.

Following the introduction of the gold coins, the RBZ announced its intention to introduce smaller denomination gold coins to cater for low-income buyers who may not afford the existing US$1 823 per unit gold coin.

A gold coin is a coin that is made mostly or entirely of gold. Most gold coins minted since 1800 are 90–92 percent gold, while most of today’s gold bullion coins are pure gold, such as the Britannia, Canadian Maple Leaf, and American Buffalo.

Responding to questions during a panel discussion at the inaugural Zimbabwe Annual Investor Forum in Harare yesterday, RBZ deputy director for international banking and portfolio management Mr Ernest Matiza said: “We continue to listen to the market and see how much demand is there and continue to produce as demand requires.

“We’ll continue to drop-feed the market with the gold coins and not flood the market with the coins. We are also getting the sense of the market in terms of what the requirement looks like from the institution,” Mr Matiza said.

He said the Reserve Bank will also consider the option where people can collectively come together and buy the gold coins rather than waiting for the introduction of lower denominations.

RBZ Governor Dr John Mangudya earlier said the central bank would also introduce and release into the market gold coins in smaller units of a tenth ounce, quarter ounce and half ounce mid-November this year.

But the apex bank said it would not allow banks to lend for the purposes of buying the gold coins as this would exert pressure on their ability to settle their transactions at the Apex Bank.

The monetary authority started with the release of 2 000 Mosi-oa-Tunya gold coins whose demand has been overwhelming in the market.

The gold coins have been available for sale to the public since 25 July 2022 in both local currency and US dollars (and other foreign currencies) at a price based on the prevailing international price of gold plus 5 percent to cover the cost of production and distribution of the coin on a

Mosi-oa-Tunya gold coins characteristics entail liquid asset status, prescribed asset status, usable as collateral, tradability and can be bought-back at the instance of the holder. Also, the gold coins have purity of 22 carats, contain 1 ounce gold, are reeded with a serial number, rounded in shape, weigh 33,93 grams, 2,63mm thick and 32mm in diameter.

Prior to the introduction of the gold coins, the US dollar was being chased in Zimbabwe, particularly on the parallel market for value preservation and importation of goods and services, with the excessive demand driving depreciation of the Zimbabwe dollar and stocking resurgence inflation.

Speaking at the same occasion, RBZ Deputy Governor Dr Jesimen Chipika said the gold coins have brought the monetary authority’s desired exchange rate and macro-economic stability.

“When we introduced the gold coin, we got all sorts of comments. We also track even the social media, some were saying what have you guys smoked, what is this thing now and we were in the middle of macro-economic stability in the second quarter.

“We (RBZ) were sure of what we were introducing to the nation, the history behind the gold coin, we want to give you the assurance that it’s a very powerful investment, which is good for anyone, businesses or even households,” she said.

“South Africa for example, the Krugerrand there as way back as 1970, your developed countries even USA have the American Eagle.”

Other countries that have also introduced gold coins include Australia, Austria, China, and the United Kingdom, among others.

“For us at the moment, because we have just introduced it.

“But in the monetary policy statement, we did indicate that we are now working on the smaller denominations for inclusivity purposes because sometimes the one ounce itself, which is around $1 million now, some people may not have that $1 million to save for six months without accessing it,” said Dr Chipika.

So far, both individuals and corporates are allowed to buy the coins and exporters whose earnings were less than US$1 million last year are required to have exchange control approval to utilise the surrender portion of their export proceeds to buy the gold coins in foreign currency.-herald.cl.zw