Tuesday, 1st August 2006 (4482 views)

Zimbabwe yesterday announced that it would abolish its system of guaranteeing prices for producers of gold, according to reports made by Bloomberg.

The country is the world's fifth largest producer of gold. Until now, the central bank of Zimbabwe reserved the right to buy all the gold produced in the country at a fixed price.

This price per ounce of gold was higher than the open market price in the rest of the world, when compared at the official exchange rate. This was meant to go some way to compensating producers for higher incurred production costs due to high black market prices for fuel and spare parts.

In reality the fixed prices in Zimbabwe were much lower than open market prices, meaning production has dropped off steeply in the last few years. Production fell from 24 tonnes to 11 tonnes of gold in the last year alone.

Under the new system, gold producers will be allowed to keep 75 per cent of their revenue in foreign accounts, but the remaining 25 per cent will converted to the national currency at the official exchange rate.

Bloomberg reported that Gideon Gono, the governor of Zimbabwe's central bank, said: "With immediate effect, gold producers will face the world market gold prices at the ruling market exchange rate, with no element of top-up gold support prices."

 

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