Individuals and institutional buyers of Reserve Bank of Zimbabwe (RBZ’s) gold coins will be required to hold them for at least 180 days before selling while exporters earning less than a million US dollars will be allowed to use the surrender portion of their receipts to purchase the coins in foreign currency.
A gold coin is made mostly or entirely of gold. Most gold coins minted since 1800 are 90–92 percent gold (22 carats), while most of today’s gold bullion coins are pure gold, such as the Britannia, Canadian Maple Leaf, and American Buffalo.
Alloyed gold coins, like the American Gold Eagle and South African Krugerrand, are typically 91,7 percent gold by weight, with the remainder being silver and copper.
The RBZ’s gold coins, named Mosi-oa-Tunya, will be released into the market on July 25.
The central bank is on record saying the coins, which are chiefly meant to provide an alternative to the US dollar as a store of value option, will help reduce demand for the greenback.
According to the RBZ, exporting companies earning less than US$1 million will be able to buy the coins in hard currency from their retained export earnings.
“Notwithstanding this requirement, exporters whose annual export receipts in 2021 were less than US$1 million, shall require a specific exchange control approval to be permitted to utilise a portion of their surrender portion that is payable in local currency, to purchase the gold coins,” the apex bank said.
“Mosi-oa-tunya” gold coins, named after Victoria Falls, will contain one troy ounce of gold and can be converted into cash and traded both locally and internationally, the central bank said yesterday. A troy ounce is a unit of measure used for weighing precious metals that dates back to the Middle Ages. Originally used in Troyes, France, one troy ounce is equal to 31,1 grammes, which translates to US$1 701 on the global market for bullion.
The coins will be sold at the prevailing international price of gold plus a 5 percent margin to cover the cost of production and distribution. The London Bullion Market Association price, a renowned global market for gold, will be the benchmark on which the 5 percent margin cost cover will be added.
The RBZ said, “The bank shall publish the Mosi-oa-Tunya gold coin price by 0800 hours daily, which shall be based on the previous day’s London Bullion Market Association (LBMA) PM Fix plus the cost of producing the coin.”
According to the central bank, selling agents, among them banks and its subsidiaries namely Fidelity Printers and Refiners and Aurex Jewellery, shall sell the gold coins in both local currency and United States Dollars and other tradable or denominated foreign currencies at the willing-buyer willing-seller exchange rate. Domestic buyers such as individuals and institutional investors will be allowed to buy the gold coins in local currency or foreign currency, subject to quantity restrictions where it is deemed necessary to avoid unintended consequences.
On the other hand, international buyers will only buy the Mosi-oa-Tunya gold coins in foreign currencies.
“Denominated currencies for the purpose of buying gold coins will include the British Pound, the Euro, Australian Dollar, Botswana Pula and Rand,” the circular read.
Vesting period on redemption
On redemption, both residents and non-residents will have the option to be paid in US dollars or Zimbabwe dollars. However, in an effort to make the gold coins serve their true purpose as an alternative investment, they cannot be sold within 180 days of procurement.
“At the discretion of the holder of the gold coin, the bank or its agents will buy back the Mosi-oa-Tunya gold coins after a vesting period of 180 days in line with the need to promote a savings culture in the country,” said RBZ.
In the meantime, local banks will not be allowed to buy the gold coins for their own portfolios until the RBZ decides otherwise in line with developments in the economy.
Economist Dr Tinashe Charumbira said, “The bank has done a good job in making the (supplying) agents not able to buy the coins upfront (for their own portfolios) as they could have hoarded the coins to the disadvantage of the goals of the RBZ.”
Thumps up from asset managers
Asset management company Zimnat said the gold coins would be a good investment option, especially for institutional investors. “In our view, investing in gold coins presents a good opportunity for institutional investors to increase their regulatory compliance by investing in an asset with Prescribed Asset Status,” Zimnat said.“In addition, it allows investors to apply Zimbabwe dollar balances to an instrument that allows for inflation hedging and rate linked returns, that are generally uncorrelated to the performance of equity markets.”
According to Zimnat, the investment instrumentits investors looking to preserve value since gold has traditionally been used as a reliable store of value. -Herald