Zimbabwe’s special release of gold coins to fight inflation is seeing strong demand, with coins selling for over $2,000 an ounce each for the first time since their release back in July.
The country’s central bank began selling gold coins in the summer to try and tame inflation by providing a store of value to the country’s plunging currency and giving the population an alternative to the U.S. dollar.
Since the release, demand has been substantial. And as of this week, the price in U.S. dollars rose above $2,000 an ounce. On Wednesday, the one-troy ounce 22-carat gold coin was going for $2,009.49, according to data on the Reserve Bank of Zimbabwe’s website. Spot gold price in USD was at $1,908.80 an ounce at the time of writing.
The coin is named ‘Mosi-Oa-Tunya,’ meaning “Smoke that Thunders” in reference to Victoria Falls. Each coin has a serial number and can be bought with local currency, the U.S. dollar, and other foreign currencies. The price is set based on the international price of gold and production costs.
Coins can be converted into cash or traded. They could also be used for transactional purposes and as a security for loans.
The program’s goal is to lower demand for U.S. dollars following the collapse of the Zimbabwe dollar. Surging inflation and currency devaluation have made things difficult for Zimbabwe’s population. The country still has the highest inflation in the world, with the annual pace running at 255% in November.
In response to the crisis, Zimbabwe’s central bank more than doubled its policy rate from 80% to 200%, a new record.
Zimbabwe also announced plans to adopt the U.S. dollar as legal tender for the next five years to stabilize the country’s exchange rate. But there is a severe shortage of dollars. This was the second time in more than a decade that Zimbabwe legalized the greenback as a legal tender.
Due to the popularity of one-ounce gold coins, the country’s central bank also released smaller units into circulation in November.
The gold coin idea also inspired the country to incentivize the nation’s biggest gold miners to produce above the state-planned targets. Large miners were encouraged by the government to produce more gold. And those who exceed their targets can receive 80% of the payment for the additional output in foreign currency.
The International Monetary Fund (IMF) has been urging Zimbabwe to boost its own gold reserves instead of selling gold coins.
“The sale of gold coins has contributed to withdrawing Zimbabwe dollar liquidity from the market, though it represents an opportunity cost in terms of foregone reserves for the Reserve Bank of Zimbabwe,” Bloomberg quoted an IMF spokesperson as saying.