Gold Economy: 10 Advantages of Using Gold Coins in Zimbabwe
The Reserve Bank of Zimbabwe (RBZ) in 2022 introduced Mosi-Oa-Tunya gold coins to alleviate the demand for the US dollar, stabilize the exchange rate of the Zimbabwean dollar, and control the rising inflation.
The substantial increase in inflation led individuals to exchange their Zimbabwean dollars for US dollars to prevent their savings from diminishing in value. Despite the success of the gold coins, there was an outcry that the coins were of astronomical value and therefore out of reach for the common man on the street.
The government announced that smaller denominations would be dispatched to banks across the country specifically naming a coin which contained 3.11 grams of gold, which was pegged to cost US$188.48.
Gold has been a valuable asset for centuries, and the use of gold coins as a medium of exchange has been a practice for even longer.
A country that uses gold coins has several advantages that make it a worthwhile investment.
As Zimbabwe is once again faced with the daunting depreciation of the local currency which is now at ZWL 180 000 for a hundred dollar bill on the parallel market (where the money is easily available), the nation still awaits the introduction of smaller denominations of the gold coins promised in 2022. The introduction of the coins will potentially once and for all reduce the stress of running around to change the ever-depreciating ZWL currency for a stable us$ which is the country’s most preferred currency of exchange.
We take a look at the ten advantages of Zimbabwe using gold coins for day-to-day transactions.
Stable and Precious Investment
Gold has always been seen as a precious metal and a store of value. When a country adopts the use of gold coins, investors have more confidence in their money because gold is perceived as a stable investment that is unlikely to lose its value over time.
Solid Asset Protection
Gold is an excellent way to protect assets because it has a unique ability to hedge against inflation and protect wealth against economic instability. Gold coins are not only durable but also resistant to damage from elements like fire or water, which makes them valuable in case of any unexpected incidents.
Reduced Risk of Currency Manipulation
Gold coins do not rely on the value of paper currency, meaning a country using gold coins is less affected by currency fluctuations and global economic developments such as interest rate hikes, inflation, and currency manipulation.
Low Correlation to Other Assets
Gold coins have a lower correlation to bonds, stocks, and other assets, meaning they react differently to market fluctuations, making them a great portfolio diversification option.
Trade Facilitation
Gold is valuable globally, countries with gold coins can use this asset to facilitate trade with other countries. Gold coins can be easily exchanged with other countries and can be used as payment for goods and services.
Limited Supply
Gold is not infinite, and this scarcity makes it more valuable. The limited supply of gold makes it suitable as a store of value and makes it less prone to inflation.
Asset Confidence
When a country holds gold, it demonstrates confidence in its financial stability and strength. Gold coins reassure investors that a country is committed to its financial well-being, which increases its confidence in the national economy.
Financial Stability
The use of gold coins helps a country maintain financial stability as it reduces inflation, and currency manipulation, lowers borrowing costs and ensures a strong currency value.
Preservation of Wealth
Gold coins have proved to be an effective tool in preserving wealth over time. They enable the preservation of wealth for future generations, as their value increases over time.
Cultural and Historical Significance
Finally, gold coins have significant cultural and historical value for many countries. The use of gold coins is a link to traditional values and serves as a reminder of national identity and heritage.
In conclusion, the adoption of gold coins in a country’s economic policies has many advantages. Gold coins facilitate trade, improve financial stability, and offer a stable and precious investment option. Gold coins also offer a low correlation to other assets and protect against currency fluctuations and manipulation. The limited supply of gold ensures value preservation over time, while its significant cultural and historical value provides a connection to national identity and heritage. For these reasons, the use of gold coins as a medium of exchange is a smart choice for any country seeking economic prosperity and stability.