To be King Midas
he who has the gold makes the rules. Is this still true today?
Zimbabwe has the second largest gold reserves in the world. Gold is the primary source of its export revenues. But like every other country right now, Zimbabwe has been hit by inflation due to the rise in cost of imported food, fuel, fertiliser and other essentials. As a result, its central bank has raised its benchmark rate from 80% to a record of 200%.
To curb inflation and stabilise its currency, Zimbabwe’s central bank launched gold coins. It is hoped that these coins will reduce the demand for foreign cash. Zimbabweans are able to purchase the one-ounce, 22-carat coins in both local currency and Us dollars and other foreign currencies at a price based on international gold price and cost of manufacturing.
What would happen if other countries followed Zimbabwe’s example and introduced gold coins into their system? Although the official gold standards are no longer in effect, other currencies do continue to influence gold. Thus gold must be traded like other currencies. Is this the secret to maintaining wealth – switching to a stronger currency like gold? During the hyperinflation of the Weimar Republic in Germany in the 1920s, it seems those who kept Us dollars backed by gold did not suffer.
Investors today can still purchase gold even when no nations are using the gold standard. By purchasing gold, they can convert their local currency into the money of the most prosperous countries.
People can protect themselves from periods of unpredictability. Although reversals may occur for gold, it can be a hedge against risks to paper currency.
In Malaysia, gold has been mined in Pahang, Kelantan and Terengganu. our recent demand for gold bars has climbed by at least 30% compared to the same period the previous year.perhaps our government should consider introducing gold coinage as an alternative to our currency.
ARVINTH NAIR MAHENDRAN Student University Malaysia, Perlis