With each passing day, we are learning more and more about Zimbabweans’ coming gold coins. Some of the new things are relatively tame such as the fact that the coins have a Zimbabwean bird on their backside. Every coin ever made in our teetering republic has had a Zimbabwean bird on its backside. Within all that excitement most people, including us, missed some very important detail. The weight and purity of the gold coins which ultimately impact the value of each coin. If what we have is true each coin will be retailing for an astounding US$1 600+. Cleary these coins are not meant for you to use to buy bread.

How we arrived at the value of each coin?

You are probably thinking, how on earth did you arrive at this figure? It is simple really we already have two important details from the RBZ’s communique about the coins:

The coins will weigh one troy ounce. One troy ounce is exactly 31.1034768 grams in weight. The RBZ is using troy ounces instead of grams to express the weight of the coin because it is a common measure in the gold industry having been used for close to 500 years. They want these coins to be internationally traded so they are adhering to international standards.
The gold to be used will be 22 carats (U.S karat) pure. Carat is a measure of how pure the gold will be. Think of it as a ratio out of 24. 22 gold is 22 parts gold and 2 parts some other metal(s). Before you start jumping up and down and scream conspiracy because the gold is not 24 parts pure you should know that doing that would just be stupid as the coins would be just too soft they will lose their shape quickly due to excessive handling. 22 carat is about as pure as a coin could get. One could argue the gold is too pure even at 22 carats.

Now that we have the two important variables we need a third variable. The current price of gold on the world markets. Gold is traded in a lot of countries. We could not use Zimbabwe as this country’s economy is not normal. We could not use the U.S market prices as the U.S is too far so we ended up settling for South African prices. If you want to scoff at this bold choice of the market don’t. There is a logic in that madness. The South African currency is named the Rand for a reason and that reason is gold. The country probably has the largest gold reserves in the world. Anyway, gold was selling for about 862.65 ZAR in South Africa. That is roughly US$52.14 at current exchange rates.

The rest is easy, the value of each coin is:

Price Per Gram At 22 Carat x Weight of the Coin
52.14 x 31.1034768
US$1 621.7353 per coin

At this price, a lot of other details about the gold coins from the RBZ start to make much more sense. These coins come with certificates which you can choose to keep at the bank or in your possession. There would not be any need for a certificate if these were Us$10 coins. You can use these coins as money but that would be for large transactions rather than you rushing to your local tuckshop to buy a loaf of bread and some sugar. Each coin can buy a lot of bread and sugar.

Unaffordable and useless to the common man

Yesterday we argued these coins would not serve the needs of the common man. Back then we based this on the fact that they would also be available in Zimbabwean dollars (ZWL) at official rates. This would mean that only the privileged and connected would be able to buy them as ordinary people would probably be turned away under various excuses just like they are denied foreign currency at the willing buyer willing seller rate. We of course assumed the coins would be something a common person could afford.

Now we know the estimated value of each coin and the belief that these coins are not for the common man is reinforced. This is a scheme the elite will use to turn their worthless ZWL into gold at the official rate. The majority of Zimbabweans can barely afford to put food on the table let alone spare US$1 620 to buy a fancy gold coin that can easily get lost. It also means that the coins will not bring about the rate-relief that the finance minister and his colleagues claim they will bring. The bulk of people will continue to hunt for USD in order to preserve the value of their ZWL.

Civil servants earn around $50 000 ZWL. Even at the generous official rate that is less than US$150. It will take more than 10 civil servants to buy each coin assuming they use their ZWL salaries to do nothing else. The gold coin is for the elite and the rich. Soon most Zimbabweans will realise that.