BY TATIRA ZWINOIRA
Financial services firm, Zimnat says gold coins introduced by the central bank last week would help institutional investors improve regulatory compliance.
On Monday, the Reserve Bank of Zimbabwe (RBZ) released 2 000 gold coins, which kicked off trading at US$1 823.
In local currency, the coin traded at $805 745 on the opening day.
The price of the coin tracks the value of an ounce of gold on the international markets.
The purpose of the coin was to reduce demand for US dollars as an alternative store of value whilst also attracting fresh forex.
It is also expected to act as a mop up tool for Zimbabwe dollar liquidity on the market.
“In our view, investing in the gold coins presents a good opportunity for institutional investors to increase their regulatory compliance by investing in an asset with prescribed asset status,” Zimnat Asset Management (ZAM), an investment subsidiary of Zimnat, said in its analysis.
“In addition, it allows investors to apply Zimbabwe dollar balances to an instrument that allows for inflation hedging and rate linked returns, that are generally uncorrelated to the performance of equity markets. However, potential downside risk emanates from poor performance of gold on the international markets.”
ZAM noted that the instrument suited investors that were 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,” ZAM said.
However, during the Alpha Media Holdings Big Debate held last week on the gold coins and its merits, an economists noted that the instrument was not attractive for forex purchases.
“The gold market is a very niche market, which is focused on collectors rather than for transactional purposes. For this reason, it is a false equivalence to assume that this gold coin will perform the same way as say the Kruger gold coin next door in SA (South Africa),” UK based economist Chenayi Mutambasere said.
“The Kruger gold coin is one of the most durable and established coins in the world today. It is above all trusted and has been trading since 1967. And I cannot say from looking at our current investor portfolio that the Zimbabwe economy commands the same level of trust,” she said.
CEO Roundtable chief executive officer Kipson Gundani said: “The major factor that will negate the efficacy of the gold coin is a deliberate policy by the RBZ to overvalue the Zimbabwean dollar thereby creating serious opportunity for arbitrage and history tells that arbitrage appetite is rampant in this economy.”
“We see it with the US dollar and everything else, so I think that is the greatest fear and factor which will also negate this,” he added.