The prices of gold have doubled in Nepal and crossed the 100000 nepalese Rupee per tola (11.664 grams of gold) mark. This precious metal has been in an upward trajectory in the past few weeks occasioned by both regional and global factors.
The Federation of Nepal Gold and Silver Dealers’ Association (FENEGOSIDA) stating that the fine gold crossed its one tola bench mark and was sold on Monday as high as 100,400 Rupees per tola. This is an increase of 400 rupees from the closing price that was realized the previous trading session.
The increase in gold’s price has caused many fluctuations in Nepal and all its sectors right from jewellers to banks. People are watching the situation closely and many consumers and investors already evaluating their position because of the impressive results of the precious metal.
There are number of reason that have triggered the gold price hike in Nepal. On the international market, political instabilities, fluctuations in the global economy, and a declining US dollar have provided the much-needed impetus to gold investments. Global gold prices continue to rise and spot gold currently trading above $2000 per ounce in recent sessions.
At home, depreciation of the US Dollar as compared to Nepali rupees has also contributed to escalating prices of gold in NEPAL. Nepal’s central bank that fixes the Nepali currency rate with India’s rupee has seen its currency drop in value along with the Indian Rupee to US dollar ratio.
The increasing gold prices, which are recorded to hit an all-time high, as been received by different parts of Nepali society. Purchasers of jewelry as well as gold are feeling the impact of slow trading as people hold back in anticipation of changes in prices. Most of the potential buyers however are being very passive and are waiting for prices to probably drop before they can make any huge investment.
On the other hand those, who invested in gold, they see their investments appreciate in value in an exponential manner. Some investors believe the situation as a way through they can exploit to sell their gold stocks since the prices are particularly high.
The prices of gold have also affected the banking sectors to a certain measure. Now a days in Nepal, commercial banks are also providing gold loans where gold is used as security. As value of gold collateral rises, there might be a need to adjust the loan-to-value ratios as well as the manner in which credit is granted.
The Nepalese economists and economic analysts do not agree on the long-run consequences of increased gold prices for the Nepalese economy. Others opine that high gold prices could lead to a rise in remittance flows because people investing in gold back home may be encouraged to send larger amounts to Nepal. This could actually create more foreign exchange reserves and enhance the general balance of payments of the country.
However others opine that steady high gold prices may lead to inflation and hence affect consumers spending habits. It has been argued that such funds directed towards the purchase of assets such as gold may be better directed towards sectors of higher productivity.
The authorities of the country and the central bank are giving attention to it. Nepal Rastra Bank, the central bank of Nepal, has from time taken anti measures to reduce unreasonable and undue importation of gold and speculation. These are washing out the amounts of the gold, which individuals can import as well as enhancing the restrictions of gold loans.
With these rising, more people and organizations now demand the government to do more in regulating the market, especially for the benefits of consumers. Some of the measures that can be used are: lowering the import tariffs on gold to make it accessible to the rightful owners for some time ; strengthening measures that will allow minimizing the smuggling and using black market.
The record high prices of gold have also given a new tow to the Nepal’s reliance on imported gold. The country’s production of gold is very low and has no local source since they have to import most of it. This makes the local market quite vulnerable to fluctuation in International price as well as currency values.
With the current effects of rising gold prices still unfolding in Nepal, the next few weeks will be defining as to whether what is currently unfolding is just a flash in the pan or a shift in trends of the precious gold business. For now, all the focus is still on the shiny metal that has fascinated the Nation, attracted wide public interest and appreciation, and soared to unmatched value.
