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Why RBZ introduced the Gold-backed digital currency

29 Apr 2023 at 07:07hrs | Views
With the local currency on a free-fall and Zimbabwe already a digital economy, ninety six percent of our transactions traded on digital platforms. The digital currency was long overdue. Zimbabwe is one of the world's top gold producers and the mineral is one of Zimbabwe's top foreign currency earners.  Gold is one of Zimbabwe's stable products and the use of gold as a currency and as a store of value is not new and has been in existence throughout history of mankind, and gold trading has undergone several significant changes over the years.

Nowadays the gold market is a global market, with gold being traded on exchanges around the world. Gold has been a valuable commodity for centuries and its trading has evolved significantly over time.

The history of gold trading can be traced back to ancient civilisations, where gold was used as a form of currency and as a symbol of wealth and power. It has been suggested that gold was mined as early as A.D. 600 in Rhodesia by Asians, and also that the gold trade was important to the Zimbabwe state only after its initial development by a religious elite28.

The use of gold as a currency and as a store of value has continued throughout history, and gold trading has undergone several significant changes over the years. One of the most significant developments in the history of gold trading was the creation of gold standards, which were systems in which the value of a country's currency was pegged to the value of gold. This allowed for more stable and predictable exchange rates, as the value of gold was relatively stable compared to other commodities.

The gold standard was widely adopted during the 19th and early 20th centuries, and it played a significant role in the global economy. However, the gold standard was eventually abandoned, and gold began to be traded more like other commodities, with the value of gold being determined by supply and demand forces.

The modern gold market is a global market, with gold being traded on exchanges around the world. The largest market for gold is the London Bullion Market Association (LBMA), which is based in London and is responsible for setting the daily price of gold. Other major gold markets include the Shanghai Gold Exchange, the New York Mercantile Exchange, and the Tokyo Commodity Exchange.

Gold is traded in a variety of forms, including physical gold in the form of coins, bars, and jewelry, as well as financial instruments such as futures contracts, options, and exchange-traded funds (ETFs). These financial instruments allow investors to gain exposure to the gold market without actually owning physical gold.

The development of electronic trading platforms has also had a significant impact on the gold market, as it has made it easier for investors to buy and sell gold and other commodities online. This has increased the liquidity of the gold market and has made it more accessible to investors around the world.

One of the key drivers of the gold market is investor demand, which can be influenced by a variety of factors such as economic conditions, political instability, and currency values. Gold is often seen as a safe haven asset during times of economic uncertainty, as it has a track record of maintaining its value during times of financial turmoil.

In recent years, there has been increasing demand for gold from emerging markets such as China and India, as the growing middle class in these countries has led to an increase in demand for gold jewelry and other gold-based products. There has also been an increase in demand for gold from central banks around the world, as many central banks have been increasing their gold reserves as a way to diversify their holdings and protect against currency fluctuations.

The gold market has also been impacted by advances in technology and the development of new methods for extracting and processing gold. For example, the use of cyanide leaching has made it easier and more cost-effective to extract gold from low-grade ore deposits, which has increased the global supply of gold.

In conclusion, the evolution of gold trading has been shaped by a variety of factors, including the development of gold standards, the growth of global markets, the impact of technology, and changes in investor demand. Gold has remained a valuable and sought-after commodity for centuries, and it is likely to continue to play a significant role in the global economy for years.

Hence, RBZ has jumped on the bandwagon to adopt a digital currency in order to stabilise our ever-depreciating Zimbabwe "dollar". 

Source - Jacob Kudzayi Mutisi
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