The yellow metal, which was selling for Rs 27,800 per Tola (11.664 grams) in July last year, gained Rs 8,400 per tola over the year and was priced at the all time high of Rs 35,200 per tola in the first week of July. [break]
The soaring prices of the precious metal have directly affected the domestic market, leading to significant decline in trading volume. Those hardly hit by the sharp rise in prices were wedding shoppers, who, according to the traders, substantially cut down their purchase.
“Total gold demand during wedding season used to go as high as 30 kg a day. But rising prices hampered sales this season and trading volume was no different than that of normal days,” said Tej Ratna Shakya, president of Nepal Gold and Silver Dealers´ Association. He further added that wedding shoppers were buying just 2 to 4 Tolas of gold.
“Gold price grows every year. But this time the price soared very high, leading to decline in demand even during the wedding season. Weakening Indian currency against US dollar and the effect of financial crisis in EU countries were the major reasons that led the gold prices to soar,” Shakya added.
Despite rise in prices, traders say the imports of readymade jewelry and valuable stones such as diamond, sapphire and ruby, among others have increased significantly. Nepal imported readymade jewelry and stones worth Rs 120 million last year, according to the association.
“Due to the surmounting price of the gold, we saw a drastic shift in people´s preference toward precious and semi precious stones such as diamond and ruby,” Shakya said. He also said traders can cash on the positive response towards by molding them into various designs and exporting them to other countries.
Nepal imported 7,000 kg of studded jewelry last year.
“Most of the people couldn´t afford gold particularly due to increasing prices of the yellow metal and the central bank´s cap on loans to unproductive sector,” Shakya said, adding that limit on gold import introduced by Nepal Rastra Bank (NRB) was another factor that led to slowdown in the domestic gold market.
Shakya said the traders will face shortage of gold during peak seasons if the policy is not reviewed.
Nepal imported 15.38 tons of gold worth Rs 41 billion over the period. Shakya said the country needs to imported gold worth Rs 20 billion to meet the domestic demand for fiscal year 2010/11.
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