Zimbabwe made gold legal tender and reintroduces gold standard

The introduction of gold coins by the Reserve Bank of Zimbabwe (RBZ) to mop up excess liquidity in the market and halt runaway inflation seems to be bearing fruit, at least for now. Individual buyers had taken up 35% of the bullion, with 65% being snapped up by corporates. As at 22 September 2022, a total of 9,516 gold coins had been sold to both individuals and corporate buyers, according to the Reserve Bank of Zimbabwe Governor, Dr John Mangudya. The gold coins are minted by the RBZ-owned Fidelity Printers, the sole buyer of gold in the country. Their price is determined by the international market rate for an ounce of gold, plus five per cent for the cost of producing the coin. Each coin weighs one troy ounce and has a purity of 22 carats. The Zimbabwe government took the unprecedented step of introducing gold coins as legal tender after inflation spiked from 191% in June to 257%. Currently, the central bank has been supplying the market with one-ounce coins, which hit the market at US$1,884.80, which saw fewer ordinary people participating because of the elevated price. The RBZ will in November introduce lower denomination gold coins to enable the participation of ordinary citizens. The smallest, a tenth of an ounce, will be made available to the public through banks and approved dealers.

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An International Monetary Fund (IMF) team led by Dhaneshwar Ghura conducted a visit to Zimbabwe from December 1 to 15.

At the conclusion of the mission, Ghura issued a statement, which, among other things, encouraged the Reserve Bank of Zimbabwe (RBZ) “to wind down the use of gold coins”.
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The Monetary Policy Committee and the RBZ never viewed gold coins as a silver bullet, but a necessary intervention at the time. It was an idea mooted to contain and reverse the accelerated depreciation of the local currency.

The product worked, as we had imagined it would. Immediately after introduction, gold coins drew away attention from the United States dollar. In our books, the effect was very impactful.

Gold was seen as the best product to contain local currency volatilities, as it offered a viable alternative to the United States dollar.

There has been some misconception, with some referring to gold coins as a currency. For the record, gold coins are not a currency. By design, the RBZ did not intend to issue them without limit.

The authorities’ intention and logic were very clear.

They sought to achieve major gains in exchange rate stability from a limited number of gold coins.

This is why, as of November 2022, the RBZ had only issued 14 200 gold coins worth Z$13.6 billion.

The target was always to issue a maximum of 15 000 gold coins; this is why the IMF agreed with the authorities to wind down their issuance.

The next step, after achieving a measure of stability, is now on attractive local currency investment instruments to anchor our currency.

By Persistence Gwanyanya- Member of the RBZ Monetary Policy Committee

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JayDubya said:

Any idea where I can purchase one?

I'm thinking I'd like to make a display. One of these contrasted with one of their one hundred trillion dollar notes.

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CiscoKid said:

They're all over ebay for around $30. ...

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CiscoKid said:

I can't see how an ounce of gold makes for a very practical coin. It isn't as if many people spend $1,900 on groceries at one time.

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Reserve Bank of Zimbabwe governor, John Mangudya, believes that gold coins are an alternative foreign currency investment to dissuade traders, investors and other economic players from holding and hoarding forex for speculative purposes.

The International Monetary Fund has cautioned Zimbabwe against gold coins, but Mangudya insists on continuing to issue the assets, which are hedged against movements in the international spot gold price.

“Use of gold coins for mopping excess liquidity is particularly important in the dual currency environ where the public has a choice of holding both the dollar and local currency,” said Mangudya this week.

Zimbabwe has sold about 11 000 gold coins, with 35% of these taken up by individual investors and the balance by corporates.

Against this backdrop, the Zimbabwean central bank says it will not discontinue the gold coins “until such time when there is a high preference” by Zimbabweans “to hold domestic currency-denominated” assets.
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THE Government has applauded Bard Santner Investors, a local investment firm for making gold coins more accessible to the public through their Gold Coin Unit Trust.

On Monday, Bard Santner launched the Gold Coin Unit Trust, which will enable investors with as little as US$15, to buy gold coins, also known as Mosi-oh Tunya.

The Reserve Bank of Zimbabwe (RBZ) launched gold coins in June last year, as an alternative investment instrument to ease pressure on the demand for the US dollars and mop up excess liquidity on the market which was destabilising the exchange rate.

In six months to June 2022, runaway inflation saw people rushing to cash in their local dollars for the greenback and this fuelled the depreciation of the domestic currency.

Just like ordinary unit trusts, collective investment schemes involving the pooling of funds by a number of investors, the Gold Coin Unit Trust enables investors to invest a minimum of just US$120 per year and own a share of a gold coin.

Alternatively, investors can accumulate units at a rate of US$15 per month. The minimum investment period is 180 days and a withdrawal notice period of seven days is required.
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Last year, the Government enacted legislation to entrench the multi-currency system, which makes both the United States and Zimbabwe dollars legal tender for all local transactions for the duration of the National Development Strategy 1 (NDS1), the country's medium-term economic blueprint, which runs until 2025.

Before the enactment of the law, the Government had already legalised the use of foreign currency for local transactions in March 2020 at the height of Covid-19.

There was phenomenal growth in the use of US dollars including loans to corporates and individuals, payments of utility bills and local authorities, and salary payments.

The US dollar-based retail transactions also increased after the narrowing of the gap between black and official exchange rates since August last year when the Government put in place several measures to stabilise the local currency and tame inflation.
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CiscoKid said:

I can't see how an ounce of gold makes for a very practical coin. It isn't as if many people spend $1,900 on groceries at one time.

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nickndfl said:

Zimbabawe tried the one way with infinite inflation. Now the pedulum is swinging back the other way. It would be interesting to see if Venezuela can fix their economy in the same way.

I imagine the brain drain on those 2 countries has been exhorbitant.

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... On a final note: those economists and other analysts who are peddling the narrative that the Zimbabwean economy is stabilising are either living in dreamland, fools’ paradise or on a cloud cuckoo land. ...

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nickndfl said:

Zimbabawe tried the one way with infinite inflation. Now the pedulum is swinging back the other way. It would be interesting to see if Venezuela can fix their economy in the same way.

I imagine the brain drain on those 2 countries has been exhorbitant.

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Goldbrix said:

According to Cliff High

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Goldbrix said:

According to Cliff High the U.S. Mint is making GOLD and SILVER Eagles as fast as they can BUT are not offering them for sale to the public.
The Rainy Day may be closer than we thought.

OBTW: Nigeria is following suit of Zimbabwe.

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... The gold coins put on the market are gradually taking effect, stabilizing the violently fluctuating exchange rate of the Zimbabwean currency against foreign currencies. Also, the inflation rate in the African country has seen a month-on-month decline since the end of last year.

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... The gold coin Mosi-oa- Tunya is now the reference point of the trading of foreign exchange. The hard currency market has since jettisoned the fungible Old Mutual stock derivative of the Zimbabwe Stock Exchange.

“The duet of the two fiat monetary units of Old Mutual Implied Rate of Exchange and US dollar of Federal Reserve Bank no longer run rooster in Zimbabwe,” said Cde Mutsvangwa.
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pmbug said:

That's not the correct coin.

2022 Gold coin "Mosi-oa-Tunya" from ZIMBABWE - Numismag

2022 Gold coin "Mosi-oa-Tunya" from ZIMBABWE - Reserve Bank of ZIMBABWE - it is worth its weight in gold (one ounce) + a 5% premium

numismag.com

See also:

Gold coin reveal: RBZ releases details of the Mosi-Oa-Tunya Gold Coin

The gold coin shall be called the Mosi-Oa-Tunya Gold Coin with the following characteristics: (i) Weight – one troy ounce. (ii) Purity – 22 carats. (iii) Identification

miningzimbabwe.com

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OldGarandDad said:

Zimbabwe will be the scene for the next distractive insurrection, uprising, coup, (pick your favorite descriptive word). The central banker cabal is just keeping their funded, I mean hired, proxy forces in reserve until they need the world to focus on Zimbabwe and away from what they are really doing.

Ghaddafi tried to institute a gold based currency, a gold dinar, in Libya and all of a sudden there were how many rebel factions all bearing down on him? How much do you want to bet this will play out like a summer re-run on TV?

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Zimbabweans outraged by Al Jazeera exposé of gold smuggling elite​

HARARE, March 30 (Xinhua) -- The Reserve Bank of Zimbabwe (RBZ) on Thursday said it had sold 31,866 gold coins in different denominations as of March 10, mopping up more than 25.8 billion Zimbabwean dollars and easing domestic inflationary pressures.

"The MPC (Monetary Policy Committee) noted with satisfaction that month-to-month inflation declined from 0.7 percent in January 2023 to -1.6 percent in February 2023 and 0.1 percent in March 2023. Annual inflation also declined from 101.5 percent in January 2023 to 92.3 percent in February 2023 and further down to 87.6 percent in March 2023," RBZ governor John Mangudya said in a press statement.
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LOCAL pension funds spent ZW$2, 29 billion on Gold Coins within a short space of just six months bearing testimony to the value which locals are placing on the instrument, Insurance and Pensions Commission (IPEC) latest data has shown.
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IPEC data released this week shows that the country's pension industry has fallen the bullion as an avenue to invest their local currency earnings largely generated from workers contributions.

"As at 31 December 2022, the industry had acquired 1,762 bullion coins of varying denominations with a value of ZW$2, 29 billion up from the initial investment of ZW$170 million since their introduction in June 2022," said IPEC.

The strategy has not only served as a hedge against inflation, but also paid dividends with the sector cashing in from the current global appreciation in the value of gold.

"The coins were acquired at an aggregated cost of ZW$1,9 billion and appreciated in value as a result of increases in the price of gold on the international market," the insurance and pensions regulator said.
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"Gold coins have been accorded a prescribed asset status which means that pension funds have to invest a certain percentage into these gold coins. I think it's a good investment in that they provide an opportunity to diversify the pension funds investment portfolio.
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It may not necessarily work in other economies, but in Zimbabwe it appears specie coins are helping to bring inflation under control.

According to a recent statement made by Reserve Bank of Zimbabwe Governor John Mangudya, Zimbabwe’s recently released Mosi-oa-Tunya gold coins “have proved to be an effective open market instrument for mopping up excess liquidity in the economy.”
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CiscoKid said:

I can't see how an ounce of gold makes for a very practical coin. It isn't as if many people spend $1,900 on groceries at one time.

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The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says his top priorities are to leave behind a sound financial system, strong central bank, and stable prices as his two terms come to an end.

Mangudya, an economist by training, was chosen by former president Robert Mugabe to serve as governor of the RBZ on May 1, 2014.

He succeeded Gideon Gono, who accelerated the central bank printing press to keep up with hyperinflation.

On May 1, 2019, President Emmerson Mnangagwa appointed him to a second and last five-year term as governor, which ends next year.
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Bulawayo based-economist, Stevenson Dhlamini said Mangudya scored some wins despite the harsh economic environment in the country.

“We appreciate that there has been growth in financial technology ever since he took office,”

“We have seen the introduction of the gold coins that brought some degree of stability of the Zimbabwean dollar,” Dhlamini said.
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pmbug said:

John Mangudya speaks on looming exit - Mbare Times

The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says his top priorities are to leave behind a sound financial system, strong central bank, and stable prices as his two terms come to an end. Mangudya, an economist by training, was chosen by former president Robert Mugabe to serve as...

mbaretimes.com

That appears to be a somewhat independent assessment of the gold coin program.

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THE Reserve Bank of Zimbabwe (RBZ) is set to introduce a gold-backed digital currency to be used as legal tender for transacting in the country as part of interventions to stabilise the local currency.

Introduction of the digital gold tokens, a form of electronic money backed by gold held at the RBZ, will represent the first steps by the central bank towards using the country’s gold reserves to anchor the Zimbabwe dollar.

Monetary authorities envisage the digital gold tokens will allow those holding small amounts of Zimbabwe dollars to exchange their money for tokens in order to store value and hedge against exchange rate volatility.

The development comes as the RBZ is also mulling releasing more Mosi-oa-Tunya gold coins onto the market to tame the recent depreciation of the Zimbabwe dollar on the parallel market.
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Zimbabwe needs $100 million of gold to kick-start its proposed bullion-backed digital currency, as the southern African nation makes another attempt to stabilize its floundering dollar.

The central bank will rely on gold reserves, which it has been accumulating, to support the initiative and stem the local currency’s volatility, according to Persistence Gwanyanya, a member of the central bank’s monetary policy committee.

“Any amount around or less than $100 million will be able to deal with our challenge in a big way,” Gwanyanya said in an interview by phone on Monday from the capital, Harare. “We expect the central bank to bring a respectable quantity that can stabilize the Zimbabwe dollar and boost demand.”
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State-owned media reported earlier this month that the country had 350 kilograms (12,346 ounces) of gold in reserves, citing John Mangudya, the central bank governor.

Zimbabwe targets a 14% increase in gold production to 40 tons this year. It earned $377 million from gold production in the first quarter compared with $463 million a year ago, according to data provided by Fidelity Gold Refineries, the nation’s sole refinery.

The plan for a gold-backed digital currency was approved by the monetary policy committee last month. Zimbabwe introduced gold coins last June as a store of value and to help support the local unit.

The Reserve Bank of Zimbabwe is finalizing a date to start the gold-backed digital currency, according to Innocent Matshe, the central bank’s deputy governor.

“It’s a concept which is pretty straightforward, we tokenize the gold, we have the gold,” he said by phone. “Every time we issue a coin, it is backed by real gold. We are still finalizing the details, but most countries are asking us how we came up with that plan.”

Matshe declined to comment on the value of gold which will be used to back the digital currency.

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The International Monetary Fund has cautioned Zimbabwe against adopting a gold-backed digital currency to deal with macroeconomic challenges like volatility in the local unit, saying it should rather liberalise its foreign-exchange market.

The central bank started selling digital tokens to investors on Monday for a minimum price of US$10 for individuals and $5 000 for corporates and other entities, as part of efforts to reduce demand for US dollars that now supersede the local unit as the preferred currency for transactions. The token will later also be used for transactions.

“A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macroeconomic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX reserves,” an IMF spokesman said on Tuesday in an e-mailed response to questions.

The Washington-based lender urged authorities in the Southern African nation to rather use conventional measures to address economic challenges. Those measures include maintaining a tight monetary policy stance and accelerating the liberalisation of the foreign-currency market by removing restrictions on the exchange rate at which banks, authorised dealers and businesses transact, it said.
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Unca Walt said:

Here we go again:

"PEACE! .......................................................... Or we will wipe you out.

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Despite a clear warning from the International Monetary Fund (IMF), the Reserve Bank of Zimbabwe has sold 14 billion Zimbabwean dollars' ($39 million) worth of gold-backed digital coins to address the several challenges faced by the country's financial system.
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... in a notice released on May 12, the Zimbabwe's central bank announced it had received 135 applications, amounting to a total of ZW$14.07 billion, to purchase the cryptocurrency backed by gold.

"The Reserve Bank of Zimbabwe would like to notify the public of the results of the RBZ Gold-backed Digital Tokens issue No. 1/2023 held on Friday 12 May 2023. The Bank received 135 applications valued at ZW$14,077,337,421 and US$810 to purchase gold-backed digital tokens. The full amount was allotted," the official notification read.

The tokens made their debut last month, with the notable mention that they were supported by a total of 139.57 kilograms of gold. The sale of these tokens commenced on May 8 and concluded on May 12.

While individuals could acquire the tokens at a minimum price of $10, corporate entities purchased them for a higher amount of $5,000.

As per the notification, Zimbabwe is currently planning another sale round for the digital tokens, and interested buyers may submit their applications between now and May 18.
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Banks in Zimbabwe may offer loans using the newly released gold-backed digital tokens as collateral.

The digital money that the central bank envisages as eventually being used in day-to-day transactions will compel lenders “to enable a third currency in their systems” in order to facilitate payments, the Bankers Association of Zimbabwe said in an emailed response to questions on Thursday.

“As the balances on gold-backed digital tokens transacting currency grows, there is potential for the banks to offer all products that are offered in Zimbabwe dollars and US dollars,” it said.
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The central bank last week received 135 applications valued at 14 billion Zimbabwe dollar ($11 million) to buy the tokens, backed by 140 kilograms (309 pounds) of gold reserves. A second auction held Thursday sold tokens worth 71.6 kilograms of gold.
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