The country’s total gold output for the first five months of the year spiked by 86.3 percent to 13,171,58kgs compared to 7,068,85kgs in the corresponding period in 2021.

Zimbabwe’s gold sector is booming, and encouragingly so, considering that the yellow metal is touted to be the leading revenue contributor to the US$12 billion mining industry target by 2023. The ambitious target was set by the government in a bid to maximise earnings from the country’s abundant mineral resources, most of which remain underutilised.

Increased output has seen gold anchoring the country's exports. Total exports in 2021 reached US$6 billion as the country saw a record US$9.7 total forex earnings.

Of the US$6 billion in export receipts in 2021, gold contributed US$1.6 billion, up from US$982.3 million in 2020. That growth trajectory has been sustained in the current year and official data shows that gold exports in the first four months of 2022 stood at US$629.4 million, up 101% from US$313.4 million recorded in the same period in 2021.

With these figures in mind, the country is set to surpass the prior year's figures to breach the US$2 billion mark in gold exports targeted by the Chamber of Mines of Zimbabwe (CoMZ) for this year.

As a result, the country’s total merchandise exports are on course to breach US$6 billion recorded in 2021 as the booming gold earnings helped the country achieve US$2.1 billion in exports value for the four months to April 2022, up 40% from US$1.5 billion recorded in the same period last year.

This year the government is targeting 40 tonnes of gold, and the production numbers are expected to reach 100 tonnes in 2023 to ensure the achievement of a US$12 billion industry. Gold is expected to contribute US$4 billion, annually from 2023 going forward.

The country’s total gold output for the first five months of the year spiked by 86.3 percent to 13,171,58kgs compared to 7,068,85kgs in the corresponding period in 2021.

Last year, gold deliveries reached 30 tonnes from just 19 tonnes recorded in 2020, a period where the global COVID-19 pandemic was wreaking havoc across many global economic sectors. Besides that, the country's gold sector had its own challenges that discouraged production, as well as delivery of the precious metal through official channels.

These include unfavourable payment methods which encouraged side marketing, with leakages believed to be sabotaging the country more revenue than was realised through Fidelity Gold Refinery (FGR), the country's sole buyer of the yellow metal.

In addition, a currency crisis and the presence of a tight policy regime like the nostro retention for exporters at 60% makes it difficult for businesses to recapitalise and expand projects.

Authorities in 2021 tried to find reason, pegging gold prices in line with the international prices and speeding up payments, the benefit of which is increased gold deliveries through FGR. In addition, the Central Bank introduced a 5% incentive for deliveries above 20 kilogrammes a month and royalties were also cut.

Whilst this helped to plug leakages, the government should listen to the exporters' plea to revise the existing 60% retention threshold which will help boost their earnings and invest in expansion projects for greater output. Another key factor is ensuring adequate power supply to help boost production.

One of the country’s largest gold miners, RioZim, for instance, said in its 2022 first quarter report that power supply challenges remained prevalent throughout the quarter, which resulted in under capacity utilisation and a high cost of production through the use of expensive alternative power sources.

Therefore, to sustain a booming gold sector and expand the whole mining industry, there is a need to ensure a favourable policy environment and promote higher production, than just rely on firm international commodity prices, which the country has no control over.

Miners have on different forums challenged the government to increase the retention ratio to 80 - 85% in order to see mines expand and be sustainable. The government is yet to heed that call.

The US$12 billion mining industry by 2023 and the respective targets for each mineral, including the US$4 for gold, should be anchored on productivity than on an expectation of firm international commodity prices which are susceptible to geopolitical events and shifts in policy frameworks by global superpowers.

Gold prices have largely been trading in the region of US$1,800 an ounce for the greater part of 2022 compared to a region of US$1,700/oz over the same period last year. Bullion prices came under pressure in recent months as the US central bank started its hiking cycle, raising rates for the first time since 2018 and signalled intention for further increases at all of its remaining meetings this year.

What experts say on global gold outlook

As reported by Bloomberg News last week, gold could be heading for another rally, with warnings over a global economic slowdown paving the way for a fresh push toward US$2,000 an ounce.

According to speakers interviewed by Bloomberg ahead of a precious metals conference in Singapore this week, a potent mix of decades-high inflation, geopolitical turmoil and growing talk of recession should be bullish for the traditional haven.

"After decades of massive deficit spending and ultra-loose monetary policies, we are heading toward a period of stagflation," said Gregor Gregersen, founder of Silver Bullion Pte. "In this kind of environment, safe-haven assets like physical gold and silver are some of the best things you can own."

Gregersen predicts gold and silver could rise to around $2,000 an ounce and $26 an ounce respectively by the end of the year and could exceed those levels should there be unexpected "black swan" events.

Rhona O'Connell, head of market analysis for regions including Asia at StoneX Group said "The economic and geopolitical fundamentals are more supportive of gold than they would be bearish.”

Bullion prices are facing resistance at US$1,930 an ounce, and according to O'Connell, if that level is cleared then US$2,000 could be reached, propelled by technical trading.

Regarding the US whose currency shares an inverse relationship with gold, Goldman Sachs Group Inc. president John Waldron and JPMorgan Chase & Co.'s chief executive officer Jamie Dimon last week both warned of shocks to the US economy amid challenges including risks from inflation and the fallout from the war in Europe. These uncertainties could well see more investors seeking a store of value.

Gold historically performs well in periods of high inflation.

Meanwhile, the US Federal Reserve has kept its six-to-12 month forecast at US$1,900, with elevated asset market volatility and stagflation tail hedges likely underpinning support at around $1,800, according to a June 1 report.

London based consultancy, Metals Focus forecasts gold could drop to a low of $1,670 as inflation eases over the rest of the year, and real rates and yields rise. Still, bullion will massively outperform US equities as well as high-yield bonds, and possibly even investment grade bonds in 2022, Metals Focus managing director Nikos Kavalis said this week as reported by Bloomberg.