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Tapiwanashe Mangwiro

Senior Business Reporter

The Reserve Bank of Zimbabwe (RBZ) last week, following a resolution agreed on by its Monetary Policy Committee (MPC), announced plans to introduce gold coins to be used as a new investment tool to store value for local investors.

RBZ Governor Dr John Mangudya, who chairs the MPC said in a statement;  “The MPC resolved to introduce gold coins into the market as an instrument that will enable investors to store value. 

The gold coins will be minted by Fidelity Gold Refineries, Zimbabwe sole authorised buyer of gold, while the central bank indicated the precious coins would be sold to the public through normal banking channels.

However, the governor said the central bank would release later the operational modalities around which the gold coins would be traded as well as the currency it would be sold in.

“Authorised dealers are advised of the introduction of gold coins into the market, as an instrument that will enable investors to store value. The gold coins will be minted by Fidelity Hold Refineries Limited and will be sold to the public through normal banking channels.

“Operational modalities for the handling of the gold coins shall be availed in due course,” Dr Mangudya said in a statement.

Analyst Farai Mutambanengwe said if the gold coins were to be sold in local currency they would provide a solution to the current inflationary challenges in the country. This would create competition for the US dollar as the most popular inflation hedge and reduce its demand.

“The gold coins will have to be made available exclusively in Zimbabwe dollars, not US dollars. They can have an issue price, but most likely they will develop a secondary market on which they trade. The ideal would be for the Government to insist on exclusive trade in Zimbabwe dollars and they can even be auctioned.”

Other analysts said the RBZ should not be worried about the possibility of the gold coins being smuggled out of the country, as they were an asset and not liquid cash, it was highly likely the coins would eventually find their way back into the country.

They believe that taking the gold coins anywhere including outside the country would not be externalisation as they are an asset and not money. Typically, there is little or no incentive to melt it down to gold, because it already has a higher value than the raw gold.

The gold coins present an opportunity for the RBZ to actually make the local currency more attractive to the investors if the coins are issued local currency, which will result in the US dollar chasing the local currency as people would need it to make the investment.

Mr Mutambanengwe said, “If I were RBZ Governor I would use the gold coins as a means of incentivising Zimbabwe dollar holding and investments, as well as managing Zimbabwe dollar liquidity, rather than as a means of mopping up US dollars. 

“I would issue them exclusively in Zimdollars so one would first have to liquidate US dollars for Zimdollars before buying them.

The best part about buying gold coins for investment is that the investor does not have to worry about its maintenance to get the best returns, unlike other tangible assets. An investor can easily keep the gold coins safe at home for hundreds of years and still sell them for a good when they eventually decide to.

Price stability is an added advantage of buying gold coins for investment, analysts said, and when compared to other investment options in the market, the price of gold never falls by a significant margin and is rather always stable even during a global financial crises.

Economist Dr Prosper Chitambara weighed in by saying, “The idea is noble, it has worked before in other countries and it has proven to be a good fit with storing value and hedging against inflation. We know that with gold, one can never go wrong.”

The analysts believe that despite the problem of confidence in the domestic economy, if the RBZ wanted to hit the jackpot with this idea, then they needed to implement the initiative and do it by the book and they would be guaranteed of its success.

All the economists and analysts who spoke to this publication differed on the exchange rate to be used, but unanimously agreed that the gold coins should be sold in the local currency in order for them to bring benefits into the economy.

“To be honest, much of what we are doing is speculation, but I think to reduce pressure on Zimbabwe dollar and reduce inflation, the coins should be sold also in local currency at the willing buyer willing seller rate,” Dr Chitambara concluded.

Mr Mutambanengwe reiterated that the coins needed to be priced in local currency, “Let me repeat, the price needs to be set in Zimbabwe dollar, not US dollar, for this to work. If it is offered on auction, then bidders will know that the coin is worth US$1 000 and bid near $700 000 anyway. No mention whatsoever of a rate or willing buyer willing seller.

“Again, this is why I say it’s important for the coin to be offered in Zim dollars, not US dollars because if I have USD and want the coin, then I have to buy Zim dollars from the market before I can bid. If I buy on the secondary market using USD, chances are the price will be higher there.”

Universally gold is regarded as a reliable hedge against inflation and there is evidence supporting the position that gold has outperformed the inflation rate in most markets and reduced the risk by a huge margin oftentimes.

Worldwide people look at gold as an alternative to currency, particularly where the local money is prone to lose value. Gold is a real physical asset that tends to maintain its value in the market, which, in turn, proves that buying gold coins is a good investment option.

Gold coins are commodities. As such, many trade at a fixed price through bullion dealers and other trading platforms. To get a fair price for the gold, it’s important for one to be aware of what they are selling and how much it’s worth.

Many gold and silver bullion coins are produced by national mints. For example, the US Mint issues the American Eagle coins in gold, silver, platinum and palladium.

There are several official bullion coins from other countries, such as the Canadian Gold Maple LeIf you know the type of gold coins that you have, you can look them up online via a gold bullion market such as Monex, Money Metals.

When checking prices, it’s important to note that all gold coin buyers will pay slightly less to purchase gold coins than their listed selling prices.

 To calculate their approximate value, one can simply weigh these coins, then calculate using the current gold price per gram.

Instead of selling to a pawn shop, street buyer or local jewelry store, it’s best to sell gold coins to a trusted and reliable gold buyer. These vendors offer competitive prices and will buy your gold coins based on their market value.