3/23/99 - Gold Winning Back Its Glitter
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Harare (The Insider, March 23, 1999) - Gold seems to be winning back its glitter with reports that consumption is firming in some of the Asian countries. According to one market analyst, a survey in January established that there was a consensus that the gold price will average US$300 an ounce for this year.
The highest price forecast is US$330 an ounce and the lowest is US$250. Gold is currently trading at around US$290 an ounce.
But mining companies which thrived on the devaluation of the Zimbabwe dollar last year which saw the currency lose halve its value in the second half may not have much to celebrate because of the current "managed" exchange rate which hasseen the dollar remain at the December 1998 level of $38 to US$1.
But according to the Standard Bank"s Business Trends, the nominal rate of the Zimbabwe dollar should fall to around $45 to US$1 by the end of the year to ensure that the real exchange rate remains competitive.
While the Reserve Bank of Zimbabwe says the local currency is now undervalued against the green buck by 50 percent, Business Trends argues otherwise. It says after falling dramatically in 1997-98, the Zimbabwe dollar"s real effective exchange rate - the measure of the country"s international competitiveness-is forecast to appreciate some 30 percent this year reflecting the substantial gap between local inflation which is expected to average 35 percent for the year against South Africa"s which is expected to average 5 percent.
Business Trends, therefore, says the Zimbabwe dollar needs to depreciate by 30 percent this year. "Given the depressed world markets for most of Zimbabwe"s exports and the sluggish regional situation, especially the South African economy, verging on recession, an undervalued exchange rate would help revive the economy since domestic demand will remain weak," it argues.
By Staff Writer
Copyright 1999 The Insider. Distributed via Africa News Online. |
