Investors appeal to gold coins from Zimbabwe

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Launched by the Reserve Bank of Zimbabwe (RBZ) on July 25, Mosi-oa-Tunya gold coins are an alternative investment option to US dollars, stocks and the real estate market and have the potential to stabilize the stock market rate, including taming inflation in the short to medium term, say market watchers.

Gold has traditionally been used as a convenient store of value as it has offered better security and has had a good market value for centuries.

There was a tremendous uptake of the coins after the first batch of 1,500 were purchased in just a few days.

Another 2,000 were released on Monday.

In a statement last week, RBZ Governor Dr. John Mangudya that 85 percent of the gold coins were purchased in local currency and the rest in US dollars.

“The game-changing lever in the entire gold coin matrix was that they are (also) bought in Zimbabwe dollars,” said economic analyst Langton Mabhanga.

Gold, he added, can effectively hedge investments as commodities are likely to anchor or influence future world trade and currencies.

“Gold is the new game, a vehicle for investment and a future global currency,” he said.

The outlook for gold in 2022 remains favorable due to the expected economic recession in Europe and America.

Gold is considered relatively less volatile than other assets.

Increased demand for US dollars to finance imports and inventory value, including ongoing fears of hyperinflation, were some of the factors blamed by monetary and fiscal authorities for increasing the Zimbabwe dollar’s exchange rate volatility.

Zimbabwe’s inflation rose to 257 percent in July from 191.7 percent in June.

Zimnat Asset Management said the coins represent a “relatively safe haven” for investors as gold has traditionally been a good hedge in times of inflation.

“This instrument is suitable for investors looking to preserve value, as gold has traditionally been a good store of value,” Zimnat said.

“Because the instrument can be used as collateral, there may be opportunities for investors looking for income opportunities to work with asset managers with structuring skills to sweat the asset.”

Given the Zimbabwe dollar’s recent volatility, buying local currency gold coins wherever possible is always the best option, even at a reasonable premium to the market, Zimnat said.

“Because investors benefit in the long term from the accumulation of real assets and thus the preservation of value.”

Stockbroker firm Morgan and Co said inflationary pressures are “cementing” the case for investing in gold coins.

“Gold is a safe haven,” they said.

“Global investors typically look to gold as a haven during times of political and economic uncertainty.

“At such times, investors holding gold have been successful in protecting their wealth.”

However, economist Mr Brains Muchemwa said gold coins could be “a viable tool for moping liquidity” but needed to be backed by monetary tightening.

He said if there is a sustained inflow of money into the market, the central bank will “end up mopping up the liquidity at a slower rate than the rate at which it injects the money…the liquidity.”

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