Gold on short supply as demand soars

KATHMANDU, Oct 31: Bullion traders have stopped sales of gold bars and gold coins and concentrated solely on sales of gold ornaments after gold supply received from commercial banks started to fall short to meet the demand that has picked up since the onset of festive season.



Officials of Nepal Gold and Silver Dealers Association (Negosida) said they resorted to such measure particularly after daily demand for gold surged to 30 kg, which is twofold of the supply they receive from commercial banks.[break]



“As supply from other sources has not been coming, we were left with no option but to stop sales of gold bars and coins,” Tej Ratna Shakya, president of Negosida, told Republica on Wednesday.



According to bullion traders, demand for gold has rose substantially since the onset of the festive season when Nepalis receive festive allowances and bonuses, among others. The commercial banks, however, are supplying just 15 kg of gold a day in the market as per the Nepal Rastra Bank´s directives.



“This short supply has badly constrained our business at crucial business hours,” said Shakya. He said that some of the dealers are even returning their customers without taking orders due to shortage of gold.



“The situation is bad,” said Shakya. He further added that worse was still to come as demand for gold jewelries soars further once the Tihar festival kicks off.

"Compared to Dashain, demand for the yellow metal rises more steeply in Tihar because many Nepalis purchase yellow metal on the day of Dhan Teras and Laxmi Puja. But this year, we fear we will have to return many of them empty handed,” Shakya stated.



Negosida has projected that daily demand of gold could jump to around 40 kg per day when the customers start shopping for Tihar. Referring to it, the association has urged the Nepal Rastra Bank (NRB) to jack up the supply for the Tihar festival.



“We have asked the NRB either to allow us to import or increase the supply quota. Otherwise, it will only spur smuggling of yellow metal,” said Shakya.



Price rises



Even though the gold price has remained constant in the international market since Monday, Negosida raised the price of yellow metal in the domestic market by Rs 300 per tola (11.664 grams) on Wednesday.



Negosida officials that set the price of yellow metal at Rs 59,300 per tola on the day attributed the rise to strengthening of dollar. However, some of the dealers linked the price rise to present mismatch seen between demand and supply in the market.



“Such price gap (between international and local rates) is practiced mainly as it creates incentive for traders to supply gold from informal sources,” said a trader.

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