This is the highest-ever price quoted for Hallmark gold. The price for yellow gold started with NPR 63,000 on June 19, 2019, followed by NPR 64,000 on June 20, 2019 and then shot up by another NPR 1,000 on June 21, 2019, continuing to remain the same until June 24, 2019.

Gold price has been increasing ever since the government announced the Nepal Federal budget FY 2019-20, wherein the import duty was increased to NPR 800 per 10 gms.

According to Federation of Nepal Gold and Silver Dealers Association Former President Tej Ratna Shakya, gold prices are likely to rise further. The hike in prices has reduced the demand for gold in the local bullion market. Earlier, gold sales during this time of the year would touch 35 kg per day. However, the sales have reduced to 25 kg per day this year.

“Demand falls sharply when prices cross Rs60,000 per tola. Gold demand currently has been reduced by 44 percent during the peak season. The period  between June to July is considered to be a peak gold season as it is an auspicious time for weddings. Though traders expected a rise in demand for the precious metal, buyers are staying away,” Tej Ratna Shakya said.

On the positive side, the hike in gold prices has attracted people with old gold ornaments to sell them at gold shops for an attractive price in exchange.

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In a move towards meeting domestic gold demands during the festival season, the government has decided to increase the daily quota on import of gold from 20 kg to 25 kg.

The new decision taken last week is triggering concerns over trade deficit that the country is already suffering because of burgeoning import bills.

“As the payment for gold import must be settled in US dollar, it will worsen the Balance of Payments (BoP) situation of the country. However, the decision could help control the possible smuggling of gold when demand soars during festival season,” says Economist Madan Kumar Dahal.

Trade balance has not been in control of the country since long majorly due to high imports and slow growth in exports.

With a huge difference, Nepal’s import bill rose to an all-time high of Rs 120 billion against export earnings of Rs 6.92 billion in the very first month of the current fiscal that began mid-July 2018.

With the rise in BoP balance, the foreign reserves of the country also declined.

“Keeping in mind the possible adverse impact on the BoP, the Ministry has raised the gold quota only up to mid-December. Although the central bank had asked to increase quota by additional 10 kg a day, we denied the proposal, citing the country’s BoP position,” says Rabi Shankar Sainju, Spokesperson, Ministry of Industry, Commerce and Supplies.

Whereas, NRB says they have decided to revise the decision to import gold owing to the pressure being laid by the local jewellers in view of the festival season.

Will have to see how the government and the central bank play a level-playing field managing the festival demands and the country’s worsening trade deficit.

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