The yellow metal was traded at two-year low of Rs 52,500 per tola on Monday. Gold had hit Rs 52,490 per tola in August, 2011. It climbed to all time high of Rs 61,850 on November 25, 2012.[break]
Gold fell to $1,450 per troy ounce in the international market on Saturday, down from $1,560 per troy ounce recorded on Friday.
“The drastic drop in price is due to the drop in gold prices in international markets as investors are fleeing from commodities market and investing on property, equity and fixed deposits where the rate of return is high,” Mani Ratna Shakya, president of Federation of Nepal Gold and Silver Dealers´ Associations, said. “Strengthening US stock market and economy due to Euro and Cyprus issues is the other reason behind investors´ shift.”
The massive drop in gold price led to rise in demand for the yellow metal on Monday. According to Shakya, demand for gold increased by around 5 kg on the day. “Many investors are in wait and see mood expecting further drop in prices,” he added. “The price won´t decline much on Tuesday as early trading in international bullion market does not show much fluctuation in prices.”
Traders say if gold price continues to fall at this rate it will be difficult for them to meet the demand. “As we are already struggling to meet market demand, rise in demand will only spur smuggling,” added Shakya. “Some traders are already sourcing gold from illegal channels.”
Though daily demand for gold hovers over 30 kg, Nepal Rastra Bank (NRB) is supplying only 15 kg a day through designated commercial banks.
According to Shakya, gold sourced through illegal channels is 99 percent pure, whereas gold supplied by designated banks is 99.5 percent pure. “This is why some customers say jewelers are supplying them low-quality gold,” Shakya said, adding that the anomalies in the market cannot be solved unless the government increases supply quota or allows traders to import gold.
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