Another Zimbabwe Gold Coin Sale Draws Limited Interest from Buyers

Harare – Responding to climbing global gold prices, the Reserve Bank of Zimbabwe restarted sales of previously halted gold coins in April.

However, investors were urged to act promptly.

By mid-June, the bank abruptly stopped selling coins from its reserves, adding another chapter to the ongoing currency instability that has affected the nation’s economy.

This time, economists indicate that the initiative had limited effectiveness.

Ithiel Mavesere, a lecturer in the economics and development department at the University of Zimbabwe, remarked that this brief selling period exemplifies inconsistent economic policies.

He points out that for most citizens, gold coins are not a practical option for storing value.

“They should have looked into introducing lower-value coins, with denominations as low as the equivalent of US$20, to make them more accessible to the general public,” states Mavesere.

Conversely, Reserve Bank of Zimbabwe Governor John Mushayavanhu asserted in a written response to Global Press Journal that the gold coins acted effectively as alternative investment instruments, experiencing notable demand from both corporations and individual investors.

According to RBZ data, corporations comprised about 79% of gold coin purchases, while individuals accounted for the remaining 21%.

Approximately US$12 million in sales

The lowest denomination of the coins equals one-tenth of an ounce of gold, valued at ZiG 9,299.13 in Zimbabwe gold (ZiG), or approximately US$347.

The highest denomination, representing one ounce of gold, is priced at ZiG 92,991.34 or around US$3,470.

Overall, the central bank sold gold coins worth ZiG 343 million, roughly US$12.8 million, according to Mushayavanhu, who noted that the recent sales were driven by increased demand tied to rising international gold prices.

“The Reserve Bank re-issued an accumulated stock of gold coins made up of those redeemed from the market and some coins still held from previous minting,” the governor wrote.

A statement from the bank in mid-June indicated that the sales aimed to clear existing inventory of gold coins and those redeemed by their holders.

Mushayavanhu explained that the bank halted minting gold coins in April 2024 to concentrate on its gold reserves, which, along with foreign currency reserves, support the Zimbabwe gold currency.

He highlighted that foreign reserves grew from US$270 million in April 2024 to US$731 million by the end of June.

The Mosi-oa-Tunya gold coins, named after the indigenous term for Victoria Falls, were first introduced in 2022 amidst significant currency instability characterized by high inflation and continuous devaluation of the prior national currency, the Zimbabwe dollar.

The goal was to reduce dependence on the US dollar and enhance economic stability.

The coins contributed to absorbing excess local currency in circulation.

Alongside other monetary measures initiated in 2022, the monthly inflation rate fell from around 31% in June to approximately 12% by August that year.

Nevertheless, the value of the Zimbabwe dollar plummeted against the US dollar, resulting in its replacement by the new Zimbabwe gold currency in April 2024. Since then, the currency’s value has halved.

A ‘drop in the ocean’

Lyle Begbie, an economist at Oxford Economics Africa, views the initial sale of gold coins in 2022 as mainly a revenue-generating strategy during soaring inflation.

He suggests that the recent sale was spurred by increasing global gold prices.

However, he stresses that the total value of the gold coins sold was inadequate to make a significant impact on the economy.

The reported US$12.8 million in gold coin sales represents less than 1% of Zimbabwe’s gross domestic product, estimated by the World Bank at US$44 billion, making it a “drop in the ocean” in light of the country’s macroeconomic context.

Economist Prosper Chitambara, also based in Harare, agrees that the recent sales had minimal influence.

He argues that gold coins do not substantially enhance currency stability in a heavily informal and dollarized economy where the US dollar prevails.

“Most economic agents prefer to conduct transactions in US dollars, as it is a highly tradable and liquid asset. There is far more confidence in the USD than in gold coins or even in the Zimbabwe gold,” asserts Chitambara.

Samuel Wadzai, executive director of the Vendors Initiative for Social and Economic Transformation in Harare, notes that while there have been sporadic efforts to use gold coins for local transactions, they have yet to gain widespread acceptance.

“Most traders still favor cash due to acceptance issues and a limited understanding of gold coins in everyday trade,” he remarks.

Isheanesu Kwenda, a 31-year-old street vendor in Harare with a sociology degree, states that the recent sale of gold coins brought him no benefits.

While he has heard about the gold coins, he has never come across or opted to purchase them.

Kwenda is part of Zimbabwe’s informal economy, which supports over 80% of the population and contributes nearly 72% to the national GDP.

“Street economics suggests one should avoid acquiring something uncertain or not well understood. I prefer to sell my goods and hold my money in US dollars, which retain value, or to keep my funds in stock,” Kwenda explains about his clothing sales.

Last year, he lost over half of his earnings after the introduction of the Zimbabwe gold. After receiving the equivalent of US$1,000 in Zimbabwe dollars, he salvaged only US$360, losing the rest to exchange rate fluctuations.

For Kwenda, restoring confidence in the economy is simple: the government must maintain a consistent plan without abrupt changes.

Gamuchirai Masiyiwa is a Reporter-in-Residence based in Harare, Zimbabwe.

*This story was originally published by Global Press Journal, which provides bold, investigative, and in-depth explanatory reporting on pressing global issues.