Zimbabwe: Analyst Cautions RBZ for Halting Gold Coins Sales

AN economic analyst has urged the Reserve Bank of Zimbabwe (RBZ) to be cautious following the decision to halt the sale of gold coins.

In a statement, RBZ governor Dr John Mushayavanhu informed members of the public that the mop up sale of gold coins had been suspended, with immediate effect, following the successful completion of the exercise.

"The RBZ would like to clarify that this was a sale meant to clear remaining stock and not the minting of new gold coins which had been suspended in April 2024.The latest round of gold coin sales also included coins redeemed by holders," he said.

The central bank exchequer advised members of the public that future gold coin sales will be undertaken upon accumulation of a sizable quantity from redemptions with gold coins in the market remaining tradable and redeemable.

The gold coins were introduced by the RBZ in 2022 as an investment avenue for holders of excess local currency, who could easily purchase the bullion coins to store value.

Against the backdrop, a respected economist who preferred anonymity warned the RBZ against the decision to block the sale of gold coins arguing the decision exposes the local currency to inflationary pressure.

"These coins eased pressures from the market because they provided a valve to a safe investment instrument. Upon their introduction, several companies avoided flooding the parallel exchange market to pursue the local currency and in a way this maximized currency stability. The RBZ just has to be very careful because apart from sustaining tight liquidity, they have few options in place in the event of shifting such a policy stance," he said.

The economist said the possibility of loosening the grip on liquidity is very high considering the current pressures mounting from industry which leaves the ZWG currency vulnerable.

"So at some point we are likely to see companies and other individual holders of excess ZWG flooding the foreign exchange market in search of the greenback and such a scenario is very dangerous," he said.

As at February 2023, gold coins worth ZW$20 billion had been sold with the bulk being snapped up by corporates, in the process contributing towards mopping up of excess liquidity.

In the same year, several companies and the Insurance Pension Fund (IPEC) reported that gold coins were seen as an investment opportunity by several pension funds which spent ZW$2,29 billion purchasing the investment instruments.

Read the original article on New Zimbabwe.