I think I know who the gold coins are actually for and it sickens me

Leonard Sengere Avatar
RBZ Gold Coins

Let us consider all that the Reserve Bank of Zimbabwe has told us about the coming gold coins. When we do that and also look at alternatives available to would-be buyers, the picture is clear. At least clear to me. There is one major group of people meant to buy the coins.

The RBZ made it clear that the main reason the gold coins exist is to be a store of value. The question then becomes, a store of value for whom?

Each gold coin costs US$1,622

Zimpricecheck went into detail about how we get to that valuation here. Each coin will weigh one troy ounce (approximately 31 grams) and will be of 22 karat quality. Using a per gram price of US$52.14, the math works out to US$1,621.74 per coin.

You can use a different per gram price but if it’s from a free and relevant market it will be in the 50s. So, we can work with a range of $1600-1700 per coin.

That means we are looking to store value for the minority in the country. Very few ordinary Zimbabweans have US$1,600 or its equivalent just laying around. It was clear before we even knew how much the coins would be worth, they were meant for the wealthy few.

That raises the question, what then should we make of the claim that the coins are meant to curb the nation’s demand for the US? If the majority of Zimbabweans, who collectively make the huge parallel market work, cannot partake in the gold coin game, their USD demand remains intact.

It’s almost as if it is not the average Zimbabwean they had in mind. It will be clear that that’s the case by the end of this.

Easy tradeability

Off the bat, the fact that the RBZ is using the troy ounce betrays the kind of use they foresee or plan for. In gold trading circles the troy ounce rules but in Zimbabwean day to day matters, the metric system with its grams and kilograms is king.

Why are we following international standards if not to allow for easy trade across the globe? That has nothing to do with storing of value methinks.

Yes, I understand that easy tradeability/liquidity makes for a good short to medium term store of value. If you can’t extract the value quickly in time of need then what was the point of storing it?

However, are we looking to allow Zimbabweans to store value in the coins locally or what? You can’t tell me that using the troy ounce allows for easy price discovery when the per gram price is just as easy to determine.

You also can’t tell me the minting processes at Fidelity were constructed with the troy ounce in mind. That could be valid but I still don’t want to hear it.

We are just purposefully making it easy for smugglers to ship out every single coin should international prices rise enough, which will probably happen with the high inflation rates across the globe likely to lead to the price of gold spiking.

We shall be forced to conclude that this is a feature not a bug.

The stock exchange

The Zimbabwe Stock Exchange became a good store of value for corporates and high income earners. They started ‘investing’ on the ZSE just to preserve the value of their millions. They knew they could liquidate their shares farily quickly should the need arise.

In the process, some realised they could turn nifty profits trading shares. The govt says this speculative trading fuelled depreciation of the ZW$.

The govt of course stepped in and stopped all that jazz. They increased tax on shares held for less than 270 days. Making shares unsuitable as a liquid store of value.

The ZSE is up 77% from December 2021 but inflation has roared louder and when that is coupled with the higher tax should one sell their shares within 9 months of purchase, what can one do to preserve value?

The gold coins had to become reality.

Infrastructure projects

We talked about how many economists and businesspeople becried that beneficiaries of huge infrastructure project tenders were flooding the market with ZW$, tanking the exchange rate in the process.

The govt promised to double 2021 infrastructure spending in 2022 and I think that’s one major factor in the accelerating depreciation of the ZW$ this year.

So, while the govt scolds us for buying hundreds of USDs on the parallel market, they turn a blind eye to their infrastructure building partners mopping up millions, maybe even billions of USDs.

So, we can see that the govt is not contradicting itself when it says the gold coins are meant to ease USD demand. They know that most of the demand actually comes from these large contractors. The general public’s collective demand pales in comparison.

Not to pick on them but a number of Chinese companies are involved in big infrastructure projects in the country. They are paid partly (mostly?) in ZW$ but they can’t take our worthless currency back to their motherland and so they do the sensible thing and exchange them for USD.

Problem is they can only do so on the parallel market, which is illegal. That’s easily dealt with. China gifts the govt a new parliament building and extends loans to them and voila, the Zim govt is literally blind to see what some Chinese companies are doing.

Gold for the Chinese

The above arrangement is a bit too ugly. Now, the gold coins clean it up a lot. Everything about the gold coins points to the Chinese and other big infrastructure players as intended beneficiaries.

Of course, other fatcats can also benefit, even some working for the govt itself. That’s just the cherry on top.

I think we chose the troy ounce to allow our partners, the Chinese, to easily repatriate their profits. So, you can see that it’s laugable to complain that the average Zimbabwean cannot afford the gold coins. The actual targets can easily afford the coins.

So, all this talk about the average person not being able to verify the authenticity of the gold coins is a waste of time. The average person is not invited to the party. Too few average people will be looking to buy the coins, meaning our fears that people will be swindled left, right and center on the streets are overblown.

Look at it from the govt’s point of view, the new parliament building needs to be paid for one way or the other. This helps keep our foriegn overlords happy.

We are paying dearly to keep our friends on the table, we sacrifice our economy’s health, we gift them all our natural resources and award them all major infrastructure tenders. Are we getting an equivalent return?

Arbitrage opportuities abound

Even if the Zim govt means well, their decisions only help make things worse in the long run.

We are all out of voices now from shouting about how the forex auction creates arbitrage opportunities that only a few connected people can take advantage of. Yet the auction remains.

Their solution is the willing buyer willing seller (WBWS) forex market that cannot be called an open market by any strecth of the imagination. It remains an exclusive club that a few, including our Chinese friends, can access.

Reminder, when we talk about arbitrage here we are becrying the situation where a product is available on two different markets at two different prices. If one has access to both markets, they can simply buy from the market with the lower price and sell on the market with the higher price.

The gold coins will be purchaseable using the ZW$ but to determine what the amount will be in our local currency we will use the WBWS rate. The WBWS rate is artificially low because it’s not an open market.

Here is what happens with the gold coins


Let’s work with the price per coin of US$1,622 we discussed above. Using a WBWS rate of 1:395, the coin can be had for ZW$640,695. However, had we used the actual market rate of say, 1:720, the coin would have cost ZW$1,167,840.

Let’s paint the picture, the gold coin can be sold on international markets just as it can be sold locally. Gold remains gold and there is a ready market for it.

You can sell a troy ounce of gold, the coin, for US$1,622. That would be equivalent to ZW$1,167,840 on the black market. Meaning if you buy the coin using the ZW$ and immediately sell it for US$1,622 you make a profit of ZW$527,145 (1167840-640695).

In USD terms that’s equal to US$732. My friend, that is nuts. All one needs to do is convert their USD to ZW$ on the black market, purchase the coin using ZW$ and then sell the coin for US$1,622.

It will go down to how quickly one can sell the coins. Not many have a gold buyer in their contacts book. We’ll know them soon enough though. They will be on the corners with the forex traders yelling ‘tochinja goridhe here blaz?’

There will probably be a limit on the number of coins a walk in citizen can purchase so the unconnected gold buyer will have to rely on us for supplies.

So, while on paper all of us can take advantage of this arbitrage opportunity, I foresee obstacles that will make it impossible for you and I to get a piece of the action. Much like how I can, on paper, get USD for the cheap on the WBWS exchange, however in practice I cannot.

What a crazy little country

The drama never stops in this teapot of ours. We shall see how it all goes when the gold coins hit the market.

You might be thinking you’ll surely be able to get at least one gold coin so you can sell it and retire. I would remind you that this is the Zimbabwean govt we are dealing with here. You might end up buying a 5 karat gold coin, much less in value than the 22 karat we have been told is coming.

So, unless you can verify otherwise, work under the assumption that there could be something wrong with the coins.

Anyway, what do you think about all this? Let us know in the comments below.

You should also read:

RBZ gold coin: Who can get one, can it buy anything & everything else you need to know

Lithium is used in phone and car batteries and Zimbabwe has lots of it. You should know who stands to benefit from it

Govt says willing-buyer-willing-seller for forex but it’s more like fortunate-buyer-unwilling-seller

Zim govt introduces gold coins which could be a game changer, commitment to multicurrency regime commendable too

67 comments

What’s your take?

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  1. Juno

    Round and round and round we go. Where it ends nobody knows.

  2. Goes Around Comes Around

    I just saw a tweet from a Zambian celebrating the Kwacha’s gain on the US dollar and virtual parity with the Rand. The way we used to laugh at them back in the day… I’m so jealous😂

    1. Khulumani

      That parity doesn’t mean much for Zambia. There are many variables to be considered before they start blowing their horns like that. Have we looked at Zambia’s trade balance and trade basket?

      1. Geralt of Rivea

        I wanted to mention this on Twitter but I thought people wouldn’t understand. The only metric Zambia should be celebrating is the lowering of their inflation into single digits.

      2. Ghettoyout

        @Khulumani a currency gains depreciates because you are doing something good (currency fundamentals and ivestor and public sentiment)
        Thia implies the Zmabian Gvt has been stricking the right notes lately hence the steady gaid of the Kwacha against the rand and US, meanwhile it also means the zim gvt has a lot of work to do

  3. 2434

    A true cynic to heart Leonard. We already knew this would be another arbitrage opportunity. You have just make it eloquent. Is amazing how nobody trusts this gvt yet they are still here. I dunt think it’s for the Chinese though. We shall wait and see who our robbers are

  4. Wage Crisis

    Gold is going down because of US recession fears. Folks are raising interest rates. Well, ZWL is going down so since we are paying our fellow Chinese in ZWL, now we can pay them in Gold, indirectly. They also want to repatriate their funds. Not their problem, but our problem.

  5. Core22

    If the price is beyond the reach of the average Zimbabwean then clearly they are not meant for the masses except a select few.
    Isn’t the central bank in a way legalising money laundering because if a citizen goes in there and buys the coin with no questions asked and backgrounds checked as to where the money was sourced from then that’s a recipe for disaster.
    Buying gold coins with the Zim dollar??…that one will come back to bite them.. Anyone and everyone will be more than happy to go and dump the ever-inflating currency and buy the gold coins.

  6. Core22

    1. These prices are way out of reach of the average Zimbabwean.
    2. Are questions asked as to the source of the money being used to buy the coins or this is legalising money laundering.??
    3. Option to get them in Zim dollar??? Oh boy…. Anyone and everyone will willingly offload the ever-inflating currency. Back to sender

  7. HM

    We underestimate the US$ thats in the hands of people as a store of value. The RBZ wants these in exchange for gold. Instead of keeping $1600 under your matress keep the gold coin and let the US$ work in the economy.
    Just like people use mombes, shares, stands, houses as a store of value. The gold coin is an added option.

    1. Imi Vanhu Musadaro

      Well, people also want their money to work for them. To a holder of USD there’s really no incentive to acquire coins, they will be more of a hassle to liquidate, than cash. Sadly, the RBZ thinks people just want to store value, so they focused on a solution to store value. People want their money to grow. You should be able to save and have projectable growth, to improve one’s own living. “Growing the economy” doesn’t seem to give any rewards to citizens, just a few elites. We are just shown graphs, told that the fundamentals are in place, there’s a surplus we don’t see working and zvakarongeka!

  8. John

    Ordinary people don’t drive the economy. The gvt doesn’t care if you trade your little 20usds in the parallel market, that’s insignificant in the grand scheme of things. But if a big entity liquidates 500m USD in the parallel market we have an issue. More so if they then use that zwl to buy the USD back on the foreign exchange system. Imagine if everyone did that, it’s no shocker the zwl keeps plummeting.

    Trickle down economics is what will make the benefits reach the ordinary person. Otherwise poor people really don’t matter in the grand scheme of things

    1. Imi Vanhu Musadaro

      Then, ordinary people shouldn’t pay taxes and we’ll see how well that statement holds. 🤷🏾‍♂️

      1. James

        There is a reason why zimra doesn’t really audit ordinary people, it makes no sense. Save for the automatically deducted income tax from your job, when was the last time you paid the other income tax from your other activities

        1. Imi Vanhu Musadaro

          The tax contribution directly attributed to individuals income is about 17 – 20%. We haven’t even factored in 2% IMTT, VAT, Capital Gains, Duty and Change of Ownership because they are just lumped together, regardless of source, when collected.

          The IRS audits individuals, because you declare income tax yourself, unlike here where the employer deducts it.

          Companies contribute a matching ~20% in tax. These companies activities are again bolstered by individuals. FMCG and banking are driven directly by individuals using their services.

          How then do ordinary citizens not drive the economy?

          FYI: The aggregated tax contributions are freely available from the Zimra website.

      2. Woke N. Woke

        Msot Zimbabweans are currently not paying taxes. That is one of the reasons why government operations have to be funded through money printing.

    2. Arthur Samawande

      Ordinary people actually control the economy through their purchasing power which determine s aggregate demand for
      goods n services.

  9. Imwe Mbeu

    🙆🏽‍♂️ ita audio sha

  10. Andrew Moyo

    What would happen if we had coins down to 0.1gr and put into circulation? To me it makes more sense to have a scale at every till than to have the money stuck in a bank. Has gvt thought of going to the gold standard? Perhaps even minting silver and copper coins as well? I’m no economist by any stretch… Just thinking out loud. What do you think? After all, the world left the gold standard through fraudulent export of USD inflation shortly after WWII. Perhaps the gold standard isn’t such a bad idea After all…

  11. DK

    Even if 2030 dream of the economy becomes a reality, most of the people will carry on dreaming of ownership of a gold coin as they will still be hand to mouthers.

  12. Anonymous

    Sports on. Money laundering by the elites starting with ….

  13. Taurai

    Experiments are best done by scientists and better confined to technical reasons. Don’t scratch your back if it’s the forehead itching -simple brain application. Unless otherwise it’s a national smart dribble.

    1. The Empress

      That’s what’s really painful about this whole thing.
      These guy’s know what they are doing wrong and instead of fixing the obvious problems with the multiple exchange rates and blatant corruption they are now thinking up even more exotic ideas on how to loot faster.
      But here is the thing whilst they loot and plunder the lives of the common people gets worse.

    2. The Empress

      These guys are basically doing experiments with people’s lives. And that’s not even funny

  14. HM

    See there are people who externalised US$ 7 billion acording to ZACC. That money is now rotting in foreign banks and investments because the US$ itself is no longer a store for value. Theoretically those funds should be brought back to buy the gold coins. If say 50% of that money was brought back, it will help our US$ balance.

  15. Mr Moss

    The US Fed can print USD literally at the press of a button out of thin air and indirectly buy off the assets of any country and also crash their currency.
    A country on the gold standard has more but not perfect protection from this. This is why in sa, one can’t take Kruger coins out,it’s legal tender and limited to 1 ounce with sarb permission.
    A 1600usd gold coin is the start and hopefully there may be smaller denominations as well as some silver in future.
    Fiat currencies all end one way-inflation.
    The move to incorporate gold as a medium of exchange is excellent and the west is going to try to crush it to prevent the idea catching on as it’ll be the end of the dollar

    1. Ras Tiraz

      well said Mr Moss.

    2. Renowedbanker

      True,and the funny thing is people are talking as if they are only limited to buy the coin in usd

  16. 1

    Hazvishandi izvo kuvanhu izvo zvoshandira ivo vezanu chete. Imi kana muchikwanisa kuritenga moti ruzhinji reezimbambwe rokwanisawo.fungaiwo vamwe vanhu varipasi pamunenge muchironga zvinhu zvenyu zvisina basa

  17. Fura

    Forget about Usd going out.if the usd loses value that will be the end
    Of the world.Gold is measured in Usd so the $ is king coz thts the language of business all over.

  18. Maxensio Banda

    I like that business

  19. Maxensio Banda

    Which type coins are buying

  20. Tonderai

    While your pessimism is valid, you’re missing a different element. You have institutional funds that have a large base of ZWL that they need to preserve value in, like pension funds. By investing their ZWL in these coins, they serve 2 purposes, 1) meet their prescribed asset requirements, and 2) retain value of large ZWL balances they have without losing money on capital gains taxes when they sell them off.

    In the end, the pensioners stand to gain in the long run (at least in theory). Not many assets can do that for them.

    Another thing is that those with free USD that has been circulating outside the formal markets cam be drawn in to feed the system and increase formal USD. Increased USD and reduced ZWL should have a positive effect on the exchange rate.

    1. Leonard Sengere

      I agree that there are elements to this I missed. I love your institutional funds example. That’s precisely the point, there are some who stand to gain. I would only argue that most Zimbabweans are outside the formal system and do not stand to gain at all. The pension example you gave is the exact example. There are no pensions for the majority in the informal sector. So, it’s messy.

      On free USD being fed into the formal market I have to say that I don’t see that happening at all. Do note that people can use ZW$ to buy the coins and that’s what they will use. Remember, if one takes their USD to the black market and then uses the ZW$ to purchase coins, they can get the coins on a huge discount.

  21. Brazzee

    Here the money heist started

  22. Joel

    Mmmmm

  23. Nomore

    Look guys the idea is very good but we have a great problem here, I will just mention one… If the coin can’t curculating through the black-market, that means it’s not going to benefit the majority . If the coin can’t benefit our citizens that means we are not trying to solve any problems, but creating a way for the investors to get it on free mode.

    It’s going to be hard to convert this coin in the future to be African currency.
    You must learn from Krugersrand check who benefit from them, then you will get an actual answer to this coin idea…..
    Ask us how it should be done then we will definitely give you the right directions to new success. Not this rubbish idea, of New gold coin.

  24. The Empress

    Gold is a funny thing you spend money to dig it out of the ground and then turn around put it back into the ground in vaults and spend money to keep it safe

  25. Max

    I think they should break down the coins in different weight categories e.g 1 ounce,half ounce,and quarter ounce to allow ordinary citizens to be players as well not just cheerleaders

  26. Anonymous

    It’s not just Zimbabwe doing this lot’s of countries overseas are starting to ditch the USD

  27. Russian space shuttle

    The Chinese wants to crash the USD that’s why they are forcing countries to trade with gold coins this was all planed Zim government just following orders 😂😂😂😂

  28. Russian space shuttle

    The Chinese wants to crash the USD that’s why they are forcing countries to trade with gold coins this was all planed our
    is government just following orders 😂😂😂😂

  29. Samuel Tapera

    It is important to give alternative ideas than just criticise for the sake of it.

    1. Leonard Sengere

      I hear you but how many experts have shared what they think is the solution but their advice falls on deaf ears. We have talked about the various options on the table a lot.
      Essentially, we are saying let’s not go about this gold coin business. Or if we are adamant it has to be done, let’s include the majority in whatever solution we come up with.
      Let’s liberalise the forex auction and make it a true market rate.
      Let’s review our tax regime, especially the IMTT and its double taxation problem.
      And the many many other ideas that some have offered, which admittedly might not work, but appear to have a better shot on paper.

      1. HM

        Leonard lets stick to the objective. In this case it is to provide people and institutions an option to STORE VALUE. Nothing else. If you want To STORE VALUE you must have it first. If one doesn’t have value to store they are not part of the problem that the coins are meant to solve.

  30. Samuel Tapera

    It is important to give alternative ideas than to just criticise.

  31. Willy Rezant

    Why is there so much interest in the Mandela coins

  32. Samukelo Hloba

    How can one get to purchase a gold coin from Zimbabwe.
    Sam Hloba, I’m an investor based in South Africa.

  33. Gold tips

    Thanks for sharing this resource. By the way can you please share your tips about gold investing at this moment? Thanks in advance for your help.

  34. Woke N. Woke

    The problem with opinion pieces driven by nothing more than opinion is that they are just emotional outbursts and only make sense from that angle. You contradict yourself and so miss the main point. You correctly state that the coins are not meant for daily trade but to preserve value. So why should they be tailored for the ordinary person? Duh! You also say that it is the big players who drive the inflationary rate of the ZWL against the USD, not the small street exchanges. But you miss the point that they mainly do that to preserve value rather than to export profits. You clearly have no idea of the actual figures of what the Chinese companies have to put in before they can even take out one tonne of ore of whatever mineral, so your wild accusations of them siphoning out, are just that. Until you can put figures on the table, you are just another propagandist spouting the given lines from the hymn. This is the most puerile analysis ever and I suggest that until you can actually bother to put together a few facts, you should desist from trying to sound clever. This is exactly why Zanu will win in 2023. We have a lot of intelligent sounding fools leading the masses nowhere.

    1. Leonard Sengere

      I will admit, I am probably just the fool screaming in the wilderness. However, careful, you might be right beside me.

      Did you hear yourself. It’s clear, the gold coins were meant to store value not for daily trade. You then argue they didn’t need to be tailored for the average person. It’s as if you are trying to say the average person doesn’t need to store value. I argue the opposite hence why I criticise a solution that works for a select few.

      On the Chinese taking out their profits, you got me wrong. I am all for people who invest in Zimbabwe being able to take out their profits and enjoy them wherever they reside. I have no problem with them trying to preserve value by raiding the black market too.

      In all this I blame our govt for the ZW$’s performance, for the messy exchange rate situation and the arbitrage opportunities it creates.

      As regards figures, we touched on those when we talked about Zimbabwe doubling down on infrastructure projects in 2022. Of the major projects, a significant number of the tenders were won by Chinese companies.

      So yeah, I don’t deny I might be a fool here but I’m not leading anyone anywhere. I’m merely expressing my opinion on a significant development that will affect us all.

  35. Twangu Bonzo

    The gold coinf is very good idea and it should be allowed to be exportable to allow countries like India, Pakistan and etc nuy. The South African Kruger Rand had done so well for SA, though the ordinary Soweto guy cannot afford of even know of it. I think this is a very good adventure.

    1. Ashley

      The problem to come is that, the poor will be poorer; When some changes are crafted, I see it being wise to consider only the general citizen not looking at who is sitting on the table, Ndapedza hangu.

    2. Shingie

      So how is the majority going to benefit from the adventure?

  36. Alex

    It has been noted by someone with a keen eye.. that the Zim Gold Coin is “1 troy ounce of 22 carat gold”.
    pure gold is 24 carat. 22 carat gold has 8.33% other metal in it thus meaning the coin is only 92% pure gold.
    In comparison.. the Krugerrand is also 22 carat gold, but weighs slightly more than a troy ounce so that the coin contains exactly 1 troy ounce of 24 carat “pure” gold.

    I hope i am wrong and that the reserve bank is issuing coins that actually contain 1 troy ounce of pure gold.

  37. HM

    Hey varume nemadzimai kana usina CASH hauna!!!! Ini handina cash. Asi ndiri busy kutsvaga. Handirari Veduwe.But I support the coins. Cause when I get the cash I I have an option to retain its its value.

    1. Neto

      Unoachengetera kupi ma coins iwayo? Kumba anobiwa kuBank anobiwa. Hauna kwaurikuenda. Chirikudiwa apa kutenga chingwa nepay yako uchisara nemari yenyama neyecombi. Hazvigadziriswe negold coin zvese izvi. Saka ndereyi? Unozombowana yekusaver mari matemba waatenga neyi?

      1. HM

        Apa we are discussing the merits and demerits of the gold coins.Kana tisina mari hazvireve kuti Gold Coin haishandi kune munhu wese. Kana tisina mari lets worry and discuss about something else saka. Pfumvudza, BACCOSSI, Presidential this and that etc etc.

  38. Shingie

    Zimbabwe is sick. Well thats not a problem as sickness is common. What is worse is it is full of useless doctors which need to be saved from themselves….but they are not aware….so sad

  39. MyAnguen

    Gold coins can work if technology is incorporated to them, this can be done by creating an app or platform where anybody in the world can buy the gold coin via the app. This will allow coins to be bought at any value and will allow for the much-needed USD investment. This will create a tradeable online currency backed by the USD.

    1. Interesting convos here

      You just shared a million dollar idea without realising it. Do you realise, that this us how Gold deposit certificates work. An Gold exchange were international investors can trade and by, based on a promisory store of value

  40. Wait

    Now the fine print: Coins cannot be sold within 180 days of being bought. 180 days what?

    1. Wait

      How do you enforce it for coins if they allow people to export the coins? O wait more invisible fine print?

  41. Anonymous

    Test

  42. J

    Please check your dollar amount regarding the Gold coin, you are out, it is more per ounce.

  43. micheal Manana

    My grand- mother in Guyana asked if it was the Bitcoin that was just introduced in Zimbabwe, could someone answer her?