Zimbabwe's official gold price rises 10-fold overnight

From Reuters
Wednesday, July 25, 2007

http://africa.reuters.com/business/news/usnBAN555950.html

HARARE, Zimbabwe -- Zimbabwe's central bank raised on Wednesday the local price of gold nearly 10-fold in a bid to curb smuggling and boost sagging deliveries.

The precious metal is the main source of hard currency for the struggling southern African nation, accounting for a third of its export earnings.

Producers will get $3 million Zimbabwean dollars per gram, compared to $350,000 Zimbabwean dollars before the change, Central Bank Governor Gideon Gono said in a statement.

Gono said the new price was effective immediately. The central bank is the sole purchaser and refiner of gold in Zimbabwe, and it pays producers mostly in Zimbabwe dollars.

"As a country, our gold production levels have lately fallen victim to escalating operating costs, as well as elements of indiscipline, side-marketing and smuggling," Gono said.

"Against this background of escalating operating costs, it has become imperative that the current gold support price be further enhanced," he added.

The move came about a month after Zimbabwe's mining chamber warned that gold producers were operating below 20 percent capacity and that some had suspended operations due to the low local gold price and the impact of electricity cuts.

It said that Zimbabwe's gold output was expected to be about 8,700 kg this year, a 23-percent drop from the 11,354 kg output last year. Deliveries of gold have been falling since the beginning of 2007.

Gold miners have been hard hit by Zimbabwe's massive inflation of more than 4,500 percent which has pushed up costs. Shortages of foreign currency and fuel also squeezed the sector.

But President Robert Mugabe's government has vowed to maintain regular deliveries of gold which accounts for 52 percent of Zimbabwe's mineral production.

Mugabe, in power since 1980, has accused some producers of smuggling gold in an effort to sabotage the economy and has warned that his government would seize mines, fueling fears of possible nationalisation.

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