That drop was one of the steepest recorded in the recent period. Gold dealers attributed the decline in the price to the twin cause of the price of gold declining in the international market and to the huge gain made by the Nepali currency vis-à-vis the US dollar.
The price of gold in the international market dropped by US$ 10 per troy ounce overnight, and settled at 921 dollar on Tuesday, while the Nepali currency gained over Rs 2 against the greenback on the day.
The prices in the market suggest that the people who bet their money on gold have lost more than a thousand rupees per 10 grams over just the three days of this week.
But although the drop was welcome news for buyers, it still couldn´t prevent gold sales from declining sharply, said Tej Ratna Shakya, president of the Nepal Gold and Silver Dealers Association (NGSDA). “It couldn´t prevent the decline because the buyers keeping track of the international market expected the prices to slip further,” he told myrepublica.com.
Such buyer expectations have mainly resulted from speculations made that the Indian currency, with which the Nepali currency is pegged, will continue to gain against the dollar over the next few days, in the wake of market´s gaining confidence in the post-election business climate.
If the Nepali currency continues to make gains against the Indian rupee, then buyers will soon be at an advantage. Dealers say that the international prices for gold too could go down because the global stock markets have started responding to the latest stimulus packages.
Since Nepal fulfills its gold requirement through international imports, any fluctuation in the price of gold and currency directly impacts domestic prices. While the fluctuations in the domestic price correlate directly with the international trends, they are inversely correlated with the movement of the Nepali rupee vis-à-vis the dollar.
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