Investors talk up Zimbabwe gold coins

Mosi-oa-Tunya gold coins, which were released into the market by the Reserve Bank of Zimbabwe (RBZ) on July 25, are an alternative investment option to US dollars, stocks and the property market, and have the potential to stabilise the exchange rate, including taming inflation in the short to medium term, market watchers say.

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

There has been a huge uptake of the coins after the first batch of 1 500 was bought in just a few days.

An additional 2 000 were released on Monday.

In a statement last week, RBZ governor Dr John Mangudya said 85 percent of the gold coins were bought in local currency and the remainder in US dollars.

"The game-changing lever in the whole matrix of the gold coins has been that they are (also) being purchased in Zimbabwe dollars," economic analyst Mr Langton Mabhanga said.

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

"Gold is the new game; an instrument for investment and future global currency," he said.

The outlook for gold for 2022 remains favourable owing to expected economic recession in Europe and America.

Gold is considered relatively less volatile than other investments.

Increased demand for US dollars to finance imports and store value, including lingering fears over hyperinflationary, were some of the factors blamed by monetary and fiscal authorities for driving exchange rate volatility of the Zimbabwe dollar.

Zimbabwe's inflation rose to 257 percent in July from 191,7 percent in June.

Zimnat Asset Management said the coins presented a "relatively safe haven" for investors as gold has been traditionally a good hedge during inflationary periods.

"This instrument suits investors that are looking to preserve value since gold has traditionally been a good store of value," said Zimnat.

"For investors seeking income opportunities, since the instrument can be used as collateral, there may be opportunities to work with asset managers with structuring capabilities in order to sweat the asset."

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

"This is because in the long run, investors benefit from the accumulation of a real asset, hence the preservation of value."

Stockbroking firm Morgan and Co said inflationary pressures "cement" the investment case in gold coins.

"Gold is a safe-haven asset," it said.

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

"During such times, investors who held gold were able to successfully protect their wealth."

However, economist Mr Brains Muchemwa said gold coins can be "a viable instrument of moping liquidity", but need to be supported by tightening of money supply.

He said if there is continued inflow of money into the market, the central bank "will end up mopping the liquidity at a slower rate than the rate it is injecting the money . . . or unable to supply enough gold (coins) to mop up the liquidity".