The Reserve Bank of Zimbabwe (RBZ) says the introduction of gold coins should spur insurance firms and banks to come with new products to entice new investors.
The sale of the gold coins began on Monday with RBZ releasing 2000 Mosi-oa-tunya coins into the market, a move meant to give the public an asset to store value amid the weakening local currency.
RBZ governor John Mangudya said there could be unitisation of the gold coins to bring in more investors.
“Insurance companies and banks can do other products out of these gold coins. They can do gold unit trusts where they do aggregation, the likes of Old Mutual, Zimnat and others. This is an opportunity for them to also make money out of this product whereby they can come up with unit trusts. Unit trusts mean an aggregation of those who are not able to buy at $1800,” Mangudya said.
Mangudya said listing of the gold coins on the Victoria Falls Stock Exchange (VFEX) would be considered after the first batch has been sold.
VFEX chief executive officer Justin Bgoni was bullish about the prospects of the listing of the gold coins on the bourse.
“It can be unitised that is, divided into smaller parts and can be bought by a number of investors. It becomes easier to buy and sell to each other. Price discovery becomes easier,” Bgoni said.
Pension funds are warming up to the gold coins but await further direction on how they should proceed.
“We work under guidance from the regulator. We are waiting for clarification from the Commission [IPEC] to say whether the gold coin is an admissible asset and in which asset class it falls in,” Zimbabwe Association of Pension Funds executive director Sandra Musevenzo told Business Times.
The gold coins will be purchased at the prevailing international spot price of gold.
On redemption, both residents and non-residents (international buyers), will have a choice to request payment in (US$) or (ZWL$).
The gold coins have liquid asset status, prescribed asset status, can be used as collateral, tradable and can be bought at the instance of the holder.
In its analysis of the gold coins, Zimnat Asset Management said the instrument suits investors that are looking to preserve value since gold has traditionally been a good store of value.
“For investors seeking income opportunities, since the instrument can be used as collateral, there may be opportunities to work with asset managers with structuring capabilities, in order to sweat the asset,” Zimnat said.
It said the instrument is a relatively safe haven and gold has traditionally been a good hedge during inflationary periods and hence a good investment for the cautious investor with a rather “low tolerance” to risk.
Zimnat said the instrument can be held for the long-term, given its durability. In addition, for short-term liquidity requirements, the instrument has liquid asset status as well as a buyback arrangement which compels the RBZ to purchase the instrument at the instance of the holder.
The first batch of gold coins targets those with excess local currency balances, accused of chasing foreign currency on the parallel market.
This comes as those with excess local currency balances such as government suppliers were accused of fuelling the parallel market in search of the greenback leading to the routing of the local currency.
The dollar is trading at ZWL$850 on the parallel market against ZWL$434.0519 on the interbank market.