Gold, stock markets or Bitcoin: Which is the best for investors outside Zimbabwe

A Reserve Bank of Zimbabwe official displays the newly introduced gold coin in Harare, July 25, 2022.

Going GOLD: A Reserve Bank of Zimbabwe official displays the newly introduced gold coin in Harare, July 25, 2022. Image credit: Columbus Mavhunga

By Kundai Mudzviti

Late last month, Zimbabwe apex bank’s Monetary Policy Committee (MPC) resolved to introduce gold coins into the market as an instrument that will enable investors to store value, the gold coins will be minted by Fidelity Gold Refineries (Private) Limited and will be sold to the public through normal banking channels.

According to the Reserve Bank of Zimbabwe, the primary aim and objective of these gold coins is to preserve the store of value for wealth. The coins were availed for purchase by the public during the last week of July at a price of US$ 1 800 or RTGS 805 745.

This development has been met with negativity by ordinary Zimbabweans. Some believe that the move is not open to an ordinary citizen who earns a fraction of its price, while some believe that it is a way of looting.

However, with the conundrums experienced in the investment sector, investing in gold can be a profitable arbitrage for international investors who wish to store value and worth in Zimbabwe, comparing it to the country’s stock markets and the fierce growing cryptocurrencies such as Bitcoin.

Even though gold prices have fluctuated in the short term, much like the stock market, the precious metal’s value has stayed relatively steady over time. Internationally, Zimbabwe’s yellow prestigious metal has been performing well, with the latest data showing that deliveries to Fidelity Printers and Refiners (Private) Limited in 2021 increased by 55,5% to 29,6 tonnes from 19,1 tonnes in 2020.

Gold has been present for thousands of years as a safe and reliable asset. Central banks, significant government organisations, pension funds, astute wealth management offices and a few organisations have always had a portion of their assets invested in gold. A key reason why people respect gold is that it is a reliable source of protection that has stood the test of time during the Great Depression.

On the other hand, Bitcoin is aggressively growing as an asset with incredible potential for both short- and long-term investment that has lured some investors. Bitcoin’s encrypted, decentralized system and complex algorithms make it tough to manipulate, making it a secure system being developed for the future. With the state of the banking sector in Zimbabwe where investors lack banking services and basic financial services like credit, Bitcoin can be used to invest and make transactions for free.

Again stock market investments offer the potential for the highest returns of all asset classes over the medium-to-long term. Share investments is a make-money-two-ways opportunity for investors who intend to buy low then sell high.

With all these three investment opportunities appearing juicy at the first glance, the decision as to which of them is the best store of value and worth becomes a complicate.

Although gold markets can be volatile at times, Bitcoin and stock market investments have the highest volatility factors as to gold hence providing more risks to investors. However, Bitcoin has proved to be the most volatile asset with most recent trends for this year showing how it drastically reduced from $69 000 to $18 000.

Latest figures from the Zimbabwe National Statistics Agency (ZIMSTAT) showed that Zimbabwe’s annual inflation rate reached 191% in June. The southern African nation already suffers from sanctions that have exacerbated the pre-existing economic crisis. With that in mind, it is important to note that gold prices can rise as a result of inflation, making it a good inflation hedging investment. When prices rise, the worth of fiat currencies declines, but the value of gold normally increases too.

Stock prices particularly in Zimbabwe fall second by second due to hyperinflation. As a result, investors tend to buy high out of greed, and sell low out of fear while dividends are always consumed by inflation. Until the economic crisis in the country stabilises, investing in shares remains complicated and too risky.

According to the World Gold Council, gold can still receive positive – if modest – support in 2022 from key jewellery markets, such as India.

As a result, the good reason why investors outside Zimbabwe can consider investing in the gold as part of their foreign reserves is the low interest rate banking environment which continue to make gold attractive.

However, the new trend of gold coins in Zimbabwe needs to be carefully scrutinised as an alternative to real gold investment before considering it. It is important to monitor the transparency at which Zimbabwean authorities will implement the concept before making an investment.