Zimbabwe Gold Coin Sales Disappoint Majority of Buyers

Zimbabwe’s Gold Coin Gamble: Why Many Are Sticking with the US dollar

Harare, Zimbabwe – A year after Zimbabwe introduced gold coins as a store of value, many citizens, especially those within the nation’s vast informal economy, remain unconvinced. While intended to curb inflation and stabilize the local currency, the coins haven’t resonated with everyday Zimbabweans like street vendor Isheanesu Kwenda.

Kwenda, 31, holds a sociology degree but currently earns a living selling clothes on Harare’s Park Street. He embodies a meaningful portion of Zimbabwe’s workforce – over 80% – operating within the informal sector, which contributes nearly 72% of the country’s GDP. He explains his reluctance to invest in the gold coins stems from a simple principle: “Street economics informs that you should not attempt to get something you are not sure of or do not understand.”

Instead, Kwenda, like many others, prefers the perceived stability of the US dollar. “I prefer to sell my goods and keep my money in US dollars as it holds value, or I can keep my money in stock,” he stated.

His skepticism is rooted in recent experience.Last year,Kwenda lost over half his earnings when converting Zimbabwe dollars to US dollars following the gold coin introduction,succumbing to significant exchange rate fluctuations. He managed to salvage only US$360 from the equivalent of US$1,000.

The Broader Context: A History of Currency instability

Zimbabwe has a long and turbulent history with its currency. Hyperinflation in the late 2000s led to the abandonment of the Zimbabwe dollar in favor of the US dollar and other foreign currencies. Attempts to reintroduce the Zimbabwe dollar have been met with limited success,plagued by rapid devaluation and a lack of public trust.

The gold coins were presented as a way to provide a safe haven for savings, offering a hedge against inflation. However,the initial price point – set in US dollars – made them inaccessible to a large segment of the population. Furthermore, the volatility of the exchange rate continues to undermine confidence in holding local currency, even in the form of gold.

Looking Ahead: The Need for Consistent Policy

Kwenda’s experience highlights a critical issue: restoring confidence in Zimbabwe’s financial system requires more than just introducing new instruments. “For Kwenda, restoring confidence is simple: The government must stick to a plan, without making sudden U-turns,” the article states.

This sentiment underscores the need for consistent and predictable economic policies. Long-term stability hinges on addressing the underlying causes of inflation,fostering a favorable investment climate,and rebuilding trust in the nation’s financial institutions.

The gold coin experiment, while innovative, serves as a reminder that sustainable economic recovery requires a holistic approach that prioritizes the needs and concerns of the majority of Zimbabweans, particularly those operating within the vital informal economy.

Is the Zimbabwe Gold Coin effectively serving as a hedge against inflation for the average Zimbabwean citizen?

The Initial Promise of Gold Coins in Zimbabwe

In late 2022, the reserve Bank of zimbabwe (RBZ) introduced gold coins – the Zimbabwe Gold (ZiG) – as a store of value aimed at curbing rampant inflation and stabilizing the Zimbabwean dollar. The initial response was enthusiastic, with the frist batch of coins selling out quickly. The premise was simple: offer citizens a tangible asset pegged to the international gold price, providing a hedge against the hyperinflation that has plagued the nation for decades. Early adopters hoped to preserve their savings and potentially profit from the appreciating value of gold. The coins were available for purchase in both US dollars and Zimbabwean dollars, aiming to mop up excess liquidity in the economy.

Why Sales Have Plummeted: A Deep Dive

However, recent reports indicate a important decline in demand for these gold coins. Several factors contribute to this disappointing trend, impacting both individual investors and the RBZ’s objectives.

High Initial Price Point: The initial price of the zig coin, pegged to the international gold price plus a 5% markup, was inaccessible to the majority of Zimbabweans. this immediately excluded a large segment of the population from participating.

Limited denominations: The coins were initially only available in 1/4 ounce, 1/2 ounce, and 1 ounce denominations. This lack of smaller denominations further restricted access for smaller investors.

Economic Instability Persists: Despite the introduction of the coins,Zimbabwe’s economic woes haven’t abated. continued currency devaluation, high inflation (though slowing), and general economic uncertainty have eroded consumer confidence.

Choice Investment Options: the emergence of alternative investment avenues, including real estate (despite its own challenges) and foreign currency accounts, has diverted potential buyers away from the gold coins.

Trust Deficit: Years of economic mismanagement and policy inconsistencies under previous regimes, like those seen during Robert Mugabe’s rule (characterized by constitutional changes to consolidate power and suppression of dissent – as highlighted in recent analyses), have fostered a deep-seated distrust in government-backed initiatives.

Tax Implications: Capital gains tax on profits made from selling the gold coins has also discouraged some investors.

Impact on the Zimbabwean Dollar & Inflation

the decline in gold coin sales has had a ripple effect on the Zimbabwean dollar and the fight against inflation.

Reduced US Dollar Demand: The initial surge in demand for the coins helped to absorb excess US dollars in the market, strengthening the local currency. The current slowdown has lessened this effect.

Slower Inflation Control: The RBZ hoped the coins would reduce the amount of Zimbabwean dollars in circulation, thereby curbing inflation. With fewer coins sold, this objective has been partially undermined.

Parallel Market activity: The continued existence of a thriving parallel market for foreign currency suggests that the gold coins haven’t fully addressed the underlying issues driving currency instability.

Case Study: The Initial Rush vs. Current Reality

The first week of sales in July 2022 saw the RBZ selling over 4,500 gold coins, demonstrating significant initial interest. though, sales figures for the first quarter of 2025 reveal a stark contrast, with only a fraction of that number being sold. This dramatic decline underscores the shifting sentiment among Zimbabwean investors. Interviews with local business owners reveal a preference for holding US dollars directly, perceiving it as a more liquid and readily accessible store of value.

ZiG Coin Liquidity & Resale Challenges

One of the major drawbacks reported by buyers is the limited liquidity of the coins. While the RBZ initially designated banks as points for buying and selling, the resale market has been slow to develop.

Difficulty Finding Buyers: individuals looking to sell their coins often struggle to find willing buyers at a fair price.

Bank Buy-Back Limitations: Banks have sometimes imposed restrictions on the quantity of coins they will buy back from individuals, further hindering liquidity.

Spread Between Buying & Selling Prices: A significant spread between the buying and selling prices offered by banks and other potential buyers reduces the profitability of reselling the coins.

Future Outlook & Potential Adjustments

To revive demand for the Zimbabwe Gold coins, the RBZ may need to consider several adjustments:

Introduce Smaller Denominations: Offering coins in smaller denominations (e.g., 1/10 ounce) would make them more affordable and accessible to a wider range of investors.

Reduce the Markup: lowering the markup on the gold price could make the coins more competitive with other investment options.

Improve Liquidity: Establishing a more robust and transparent resale market, potentially through a dedicated exchange, would enhance liquidity and encourage trading.

Address Economic Fundamentals: Ultimately, the success of the gold coins is tied to the overall health of the Zimbabwean economy. Addressing the underlying issues of inflation, currency instability, and economic uncertainty is crucial.

* Openness and Accountability: Building trust through transparent operations and accountable governance is paramount, learning from past experiences of economic policy shifts and their impact on citizens.

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