The increase in supply became possible after Nepal Rastra Bank (NRB), which had restricted the per day gold supply ceiling to 15 kgs, allowed commercial banks to sell 20 kgs to dealers this week.[break]
“This will provide relief, but will not end the shortage in the market,” said Tej Ratna Shakya, president of Nepal Gold and Silver Dealers´ Association (Negosida), pointing out that even this increased supply level is only half the total demand in the market.
According to Negosida, the demand for gold is well over 40 kg a day.
The fresh decision by the central bank came on Wednesday. However, dealers said the situation has not changed as commercial banks, the authorized importers, did not supply even the previously set quota over the week.
“The short supply persists as the banks have not supplied even the daily quota of 15 kgs since Sunday,” said Shakya.
Dealers disclosed that as a result they are still relying on gold brought in illicitly from India to meet the demand. “This has forced us to continue selling gold at a higher price,” he said.
Records at Negosida show that traders on Saturday forced customers to pay Rs Rs 55,400 per tola (11.664 grams), whereas the international price of US$ 1,780 per troy ounce (31.103 grams) suggests the price here should have been Rs 55,000 per tola.
Dealers said they have been forced to charge customers Rs 400 higher because they need to provide an incentive to the illicit trade.
“In order to do away with this anomaly, we had asked the central bank to allow us also to import gold. But it did not listen,” said Shakya.
The new procedures that NRB unveiled recently want banks to separately arrange gold for exporters of jewelries and other articles containing gold. This provision is intended to make sure that the quota of 20 kgs would be fully available for local consumption.
It also restricts banks from charging dealers more than 1 percent above what they themselves pay for the gold. This provision was incorporated on demand by Negosida, which complained that different banks charged different rates.
Citing short supply, dealers have continued to refuse selling raw hallmark gold, something demanded by investors. They sell only gold ornaments.
“It is very unfortunate that we have been forced to turn away customers,” said Manik Ratna Shakya, proprietor of Gahana Kunj at Wotu, adding that short supply badly affected his business during the prime wedding season.
Given the present situation, Negosida said they are holding a meeting with government officials to seek alternatives for meeting local demand.
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