Harare (New Ziana) –The Reserve Bank of Zimbabwe on Tuesday introduced gold coins, called the Mosi-Oa-Tunya (the local name for the Victoria Falls), debuting at US$1 823.80 or ZW$805 745.35 per coin.
Monetary and fiscal authorities are highly optimistic that the gold coins will diminish the appetite of local companies and individuals for buying United States dollars on the parallel market as a store of value.
Launching the coins, Reserve Bank of Zimbabwe governor Dr John Mangudya said an initial batch of 2 000 had been released into the market.
The daily price of the gold coins would be announced by the RBZ every morning based on the previous day’s London Bullion Market Association gold price, plus five percent to cover production and distribution costs.
“We have minted more than 2 000 gold coins but what we have taken to the market today is 2 000 so that we see how they fare. Subsequent replenishment will be on a demand basis,” he said.
“What we expect to see, is the stabilisation in the exchange rate and therefore by extension the pass-through effects in the pricing (of goods and services). Therefore, we expect to see price stability in the economy.
“These coins are going to absorb the excess liquidity in the market. The excess Zimbabwe dollars that were chasing US dollars in the parallel market will no longer be there because it will now be in the gold coins.”
He added; “The first target is the excess local currency balances that are chasing money on the parallel market. People with lower bank balances have no capacity to influence the parallel exchange rate. The second target is we are also going to put in place smaller denominations of gold coins to ensure that the rest of the public will benefit.”
Mangudya said the Central Bank would not allow banks to lend for purposes of purchasing gold coins and the liquidation of blocked funds to buy the coins is also prohibited.
He said the gold coins were a secure alternative investment product.
“In Zimbabwe there are two demands for foreign currency. The first demand for foreign currency is called import demand, the second is store of value demand, people do that because of what we went through in the past because of hyperinflation, the loss of money through currency reforms. People now therefore go to the parallel market to look for US dollars as a store of value.
“We are now providing that store of value in gold to ensure that people do not run to the parallel market to look for a store of value. There is no other better product that can be used as a store of value than gold,” he said.
Mangudya said adequate safeguards had been put in place to ensure there were no arbitrage opportunities.
“If a commercial bank provides a loan to an individual or company to purchase gold coins they are endangering themselves because at the end of the day they might not necessarily be able to meet their statutory settlements at the Central Bank,” he said.
The gold coins will be sold through the RBZ and its subsidiaries, Fidelity Gold Refinery and Aurex, local banks and selected international banking partners.
Each coin will have a unique serial number, weigh one troy ounce and have a purity of 22 carats.
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