Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: And Israeli drone strike near the Lebanon Syria border has
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Speaker 2: Gold is back in fashion. Central banks around the globe
Speaker 2: are returning to the precious metal as geopolitical tensions increase,
Speaker 2: and many African nations are looking to build up reserves
Speaker 2: too as they look for stability at a time of
Speaker 2: growing uncertainty, and the price of gold is responding.
Speaker 1: Gold continues in terms of price. It's March ever higher.
Speaker 1: Gold is a great safe haven.
Speaker 3: The spot price of gold touched two thousand, four hundred
Speaker 3: and eighty three dollars and seventy three cents to us pronounce.
Speaker 1: That's its highest price ever. We've got to going to
Speaker 1: three thousand dollars seven next twelve.
Speaker 2: So what's behind the push for bullion and will this
Speaker 2: trend continue? I'm Jennifer Zabasaja and this is the Next
Speaker 2: Africa Podcast, bringing you one story each week from the
Speaker 2: continent driving the future of global growth with the context
Speaker 2: only Bloomberg can provide. Bloomberg's Ray Lovu has been following
Speaker 2: this rush for gold and he's joining us now from Zimbabwe.
Speaker 2: Thanks for joining us, Ray, how are you.
Speaker 1: Thank you for having me Jen, I'm very well.
Speaker 2: Events Thanks so much for being here. Listen, let's start
Speaker 2: maybe with the history if you can, if you could
Speaker 2: just take us back to really how this gold rush started.
Speaker 3: So we've seen a couple of African nations jumping on
Speaker 3: to gold basically two prop up the economies. That kicked
Speaker 3: off back in about twenty twenty two with Ghana basically
Speaker 3: swapping gold for oil to pay for oil because of
Speaker 3: an effects shortage, and then last year Madakasca as well
Speaker 3: jumping onto gold to try and prop up their.
Speaker 1: Reserves as well.
Speaker 3: Madakaska is the largest vie in the producer in the
Speaker 3: world and they saw a deep in production and so
Speaker 3: naturally the shift to gold was an attempt to try
Speaker 3: and ensure that they've diversfied their portfolio, have enough supply
Speaker 3: of for x and then particularly the CAA. We've seen
Speaker 3: several other African countries as well getting into that playbook,
Speaker 3: particularly Tanzania as well, buying about six tons of gold in.
Speaker 2: June, and you mentioned ray the four X reserves. Is
Speaker 2: that the main reason behind why a lot of these
Speaker 2: banks are looking to build up their gold reserves or
Speaker 2: are there other issues that they're maybe looking at and
Speaker 2: saying this is the opportune time.
Speaker 3: Well, that's one of the reasons, but much broader than that.
Speaker 3: One of the compelling reasons for the central banks is
Speaker 3: to diversify the app portfolio. The central bankers that we
Speaker 3: did manage to speak to South Sudan and Zimbabwe's cases
Speaker 3: in point points out that their strategy to diversify their
Speaker 3: portfolio and their holdings. But U knowally, given the global
Speaker 3: attentions that are at play at the moment, the war
Speaker 3: in Ukraine and what we're seeing in the Middle East
Speaker 3: as well, so most of these African countries are nervous
Speaker 3: at what the implications of some of these events mean
Speaker 3: for them domestically. So using gold, which historically has always
Speaker 3: been a safe haven, offers them comfort. And I would
Speaker 3: also add on and say some of these African countries
Speaker 3: actually produce gold, so they do have a channel where
Speaker 3: they have within country the ability to buy gold from
Speaker 3: atisanal miners buy it in local currency and they keep
Speaker 3: the holdings and then sell it off for effects at
Speaker 3: whatever stage they may then require to show up their reserves.
Speaker 1: So it's really a diverse mix of reasons why we're
Speaker 1: seeing many of these countries jumping onto the cold rush,
Speaker 1: as it were.
Speaker 2: And especially when it comes to commodities, we are hearing
Speaker 2: more and more African nations trying to at least reap
Speaker 2: some of the benefits right that global investors are getting
Speaker 2: with commodity prices right now. Right when it comes to
Speaker 2: this gold rush, and specifically maybe we talk about Zimbabwe.
Speaker 2: Zimbabwe of course has a long history with the US dollar,
Speaker 2: and the reporting says that the attempt was maybe to
Speaker 2: try to dedollarize the economy. Right, how much is the
Speaker 2: dollar and the usd and what's happening in the US
Speaker 2: sort of playing into this gold rush.
Speaker 3: I think it's effect for different countries. In zimobwez case,
Speaker 3: Zak definitely an outlie. I think the overall strategy and
Speaker 3: focus is to deterlarize. They've not been shy about saying
Speaker 3: that openly. Whether it will succeed or not is something
Speaker 3: that we keep an eye on. But for other countries,
Speaker 3: I don't get the sense that it's necessarily slanted towards
Speaker 3: appending the dollar, because the dollar still plays a pivotal
Speaker 3: role in terms of the mix of reserves. But I
Speaker 3: think for countries like Uganda is another example which has
Speaker 3: also moved to the cold rush, buying William is purely
Speaker 3: a way to diversify given some of the domestic issues
Speaker 3: that are happening in Uganda, the LGTQ situation that took
Speaker 3: place where basically, you know, there's a new legislation that
Speaker 3: came on board and then Uganda was then cut off
Speaker 3: from funding. So they are looking at that and saying, look,
Speaker 3: they may be a possibility that we may not have
Speaker 3: finance accessible to us because of the laws that we've elected.
Speaker 3: Therefore gold could offer us some room to continue the
Speaker 3: smooth running.
Speaker 1: Of the economy.
Speaker 3: So I think for different countries there's different reasons why
Speaker 3: they are moving to go, but certainly Zimbablos case, it's
Speaker 3: clear cut it's an attempt to try and move away
Speaker 3: from the dollar.
Speaker 1: Is there a.
Speaker 2: Risk to the strategy and this approach, And I know
Speaker 2: you're saying it's different depending on which country we're looking at,
Speaker 2: but can you make the statement that maybe having too
Speaker 2: much gold reserves could potentially be a downside for some
Speaker 2: of these central banks, or you know, is there a
Speaker 2: perfect balance that these countries really need to strike.
Speaker 3: So the indication that we have for now, and also
Speaker 3: coming from the World Gold Council, they expect central bankers
Speaker 3: right around the world to increase their holdings for the
Speaker 3: next twelve months. So there isn't any immediate risk in
Speaker 3: terms of accumulating gold right now. The price of gold
Speaker 3: has been very high. It's record highed this year and
Speaker 3: some of the forecasts putting it at twenty seven hundred
Speaker 3: by the end of the year, and some analyst also
Speaker 3: think it could preach three thousand dollars by early next year.
Speaker 3: So I think the outlook definitely is favorable at the moment,
Speaker 3: and the countries that are on this cold rush of Polish,
Speaker 3: they feel that they're not going to lose out or
Speaker 3: they're going to have any risk whatsoever at this point
Speaker 3: because I think of indications really point to a positive
Speaker 3: focused for gold.
Speaker 2: Stick with me, Ray when we come back, We're going
Speaker 2: to look at which other countries are building up their
Speaker 2: reserves and how long this trend might actually continue.
Speaker 1: We'll be right back and welcome back.
Speaker 2: Ray in Lovu is still with us and we are
Speaker 2: talking all things gold and gold reserves. Ray, we talked
Speaker 2: about a few of the countries there that are building
Speaker 2: up their gold reserves. Are we seeing more and more
Speaker 2: countries really joining this trend? Are they seeing countries like
Speaker 2: Uganda and zim benefiting off of it and coming out
Speaker 2: and making their own statements about how they want to
Speaker 2: maybe get into this as well.
Speaker 3: Yeah, I think the countries themselves are certainly bullish about
Speaker 3: getting into gold and their main driver right across the
Speaker 3: central theme is basically diversifying their portfolios. And some of
Speaker 3: these countries, Uganda and Zimba, particularly in Zimbabwe, they do
Speaker 3: have the gold in country, they produce gold, they have
Speaker 3: gold mines, so for them it's almost like a no
Speaker 3: brainer in a sense to say, look, we have the commodity,
Speaker 3: why not build reserves using the commodity which is available
Speaker 3: in country. Ycana is not a major goal producer, but
Speaker 3: they do have several minds as well. We do expect
Speaker 3: and see other countries jumping on board. South Sudan, like
Speaker 3: I mentioned earlier, the governor they did say he's looking
Speaker 3: at what's happening at the moment and will be bringing
Speaker 3: legislation to Parliament and to try and see if that
Speaker 3: could be something that could be approved in Nigeria as well.
Speaker 3: Recently or so, lawmakers they ask the Central Bank to
Speaker 3: begin to look at using gold to show up the economy.
Speaker 3: So there's definitely I think some trend or some team
Speaker 3: that's playing out along across the continent in different measures.
Speaker 3: But I think the entire sort of like framework is
Speaker 3: about divers fine and supporting the different economies ultimately.
Speaker 2: And Ray, you have a story out now about how
Speaker 2: Zimbabwe's gold back currency is actually being used potentially that
Speaker 2: is coming from the central Bank governor telling that two reporters.
Speaker 2: Is this a success story already? Is it too early
Speaker 2: to know whether or not this will be a success
Speaker 2: for a place like Zimbabwe.
Speaker 1: Yeah, so definitely.
Speaker 3: We had a chance to interview the Central Bank Governor,
Speaker 3: John Mischavan, and he's Polish in terms of what the
Speaker 3: go back currency, the zeke is the short for Zimbabee
Speaker 3: gold is down to the economy. Inflation has been tamed,
Speaker 3: exchange rate volatility has ended. So from that standpoint, in
Speaker 3: terms of the immediate visible turnaround of the economy who
Speaker 3: is very polish about it, and what he's seeking to
Speaker 3: do now is to increase the gold reserves. When the
Speaker 3: Zeke was launched in early April, it was backed by
Speaker 3: two point five tons of gold and about hundred million
Speaker 3: dollars in foreign currency. So the Governor when we spoke
Speaker 3: to him, his targeting to have over three tons by
Speaker 3: the end of the year in terms of the gold.
Speaker 1: Holdings of physical gold holdings.
Speaker 3: So ready, that signals that this is the path that
Speaker 3: Zimbabwe is committed to and they're seeking to continue on it.
Speaker 2: And I wondered are people actually using the zig Is
Speaker 2: it now being used more than the dollar was?
Speaker 3: So the years dollar is still the dominant currency of
Speaker 3: transaction in the economy. It's as of the related statistics
Speaker 3: that we have, it's holding about seventy percent of all
Speaker 3: transactions are donion dollars and about thirty percent in the zeke.
Speaker 1: So initially when the Zeke was.
Speaker 3: Launched and took over from the defunct Zimbabwe Dollar, it
Speaker 3: accounted for about fifteen percent. So it's doubled in just
Speaker 3: over three months in terms of its usage and the
Speaker 3: government is also created The Minister Nance Minister last week
Speaker 3: announced his budget, where is basically ordered government departments to
Speaker 3: accept payments in local currency in the z and not
Speaker 3: in US dollars. So they're creating these pockets of demand
Speaker 3: to have that demand or to create demand for the currency.
Speaker 3: But in terms of the numbers, there's certainly a lot
Speaker 3: of usage now on paper, but day to day, I
Speaker 3: think the preference for ordinary people is to transact in
Speaker 3: US dollars. That's what people left access to easily. ZG
Speaker 3: banknotes not so much. I've when you come across one
Speaker 3: ten ZG note, which is about seven US cents since
Speaker 3: the time the currency was launched.
Speaker 2: Wow, just one in a few months, let's just And
Speaker 2: then on on gold, you were mentioning the price of gold.
Speaker 2: You were just taking a look at it. It's constantly changing.
Speaker 2: You said, it's pretty pretty bullish forward outlook for gold.
Speaker 2: Is there anything maybe that could get in the way
Speaker 2: of that. Not.
Speaker 1: At the moment.
Speaker 3: The outlook from the world called console really is gold
Speaker 3: is going to continue on its path. Obviously, there's a
Speaker 3: lot of attention on the your political tensions in the
Speaker 3: Middle East and the US election coming up in November,
Speaker 3: and also the FAID, what's going to cut rates so
Speaker 3: I think at the moment, really the bet is still
Speaker 3: on gold. I can't immediately see a shift from.
Speaker 2: That, absolutely, and it's interesting too to look at how
Speaker 2: the other commodities play out as well. There's a note
Speaker 2: from a Bank of America about silver in particular and
Speaker 2: how that compares to gold. It's all be interesting to
Speaker 2: watch those metals. Thanks so much. Ray, really appreciate your
Speaker 2: reporting and for joining us on the podcast this week.
Speaker 1: Thank you, Jen.
Speaker 2: You can read more from Ray and the team on
Speaker 2: Bloomberg right now. We will put a link in the
Speaker 2: show notes. So clearly this is African nations responding to
Speaker 2: the uncertainty in the world right now and what that
Speaker 2: might pretend for their own economies. But it might be
Speaker 2: too early to conclude that this goldrush is actually a
Speaker 2: silver bullet for countries struggling with currency volatility and their
Speaker 2: own financing setbacks. This program was produced by Adrian Bradley.
Speaker 2: Don't forget to follow and review this show wherever you
Speaker 2: usually get your podcast. I'm Jennifer's Apisaja. Thanks so much
Speaker 2: for listening.