Gold could reach a value of Rs200,000 per tola by mid-2025

Nepali gold traders have predicted a further bullish trend just as the precious metal rose to a new high of Rs167,400 per tola in the local bullion market on Sunday.

Manik Ratna Shakya, former president of the Federation of Nepal Gold and Silver Dealers’ Association, said they estimate that the gold price could cross the Rs 200,000 mark by mid-2025, caused by various external factors such as geopolitical tensions and the US. election.

International media reports say an Iranian attack on Israel could affect gold.

Investors often seek safety during a crisis and focus their money on assets such as gold. An Iranian attack could stoke fears of regional conflict, causing investors to pour their money into the gold markets. Such an increase could increase the price of gold.

“Gold remains the safest haven globally today,” he said. “The impact of the geopolitical tension scenario increases investors’ appetite for gold.”

The purchase of the precious metal reflects increasing interest in alternatives to the dollar-based financial system.

Over the past twelve months, the price of an ounce of gold on the international market has risen from $1,947 to $2,746, a gain of 41 percent.

In Nepal, gold has gained Rs50,400 per tola, up over 43 percent year-on-year.

The price of the yellow metal has more than doubled in the past five years. Before the Covid-19 pandemic broke out in Nepal, it was Rs75,000 per tola.

Shakya said the interesting thing happening globally is that central banks, apart from investors, are buying gold these days.

According to one Financial times Analysis shows that consistent purchases by foreign central banks have been a key driver of gold’s strength.

Such purchases appear to be linked not only to the desire of many to gradually diversify their reserves away from the significant dominance of the dollar, despite America’s “economic exceptionalism,” the analyst said.

There is also interest in exploring alternatives to the dollar-based payment system that has been at the core of the international architecture for some 80 years.”

Global media analyzes indicate that economic and geopolitical uncertainty are positive drivers for gold due to its safe haven status and ability to remain a reliable store of value. Its low correlation with other asset classes means it can act as insurance during bear markets and geopolitical tensions.

The cases in Nepal are different.

According to Shakya, gold is not allowed for investment in Nepal, although it can be used as collateral to borrow money from banks for decades. Traditionally, people keep gold ornaments and jewelery as collateral with the local lender to borrow money.

“As a result, when sales boom globally where it is allowed as an investment, sales in Nepal hit rock bottom,” Shakya said. “That means if the price of gold rises, people won’t buy it.”

“If it was allowed for investment purposes, it would play an important role in the economy and government tax collection,” he said, adding that the precious metal associations have requested the government several times to allow gold as an investment vehicle.

People are not allowed to buy raw gold. The central bank exclusively allows commercial banks to import up to 20 kg of gold per day, and gold dealers are allowed to buy one kg of gold from the banks at a time.

India regulates the ownership of gold. There is no upper limit for owning physical gold (such as jewelry, coins, bars, etc.), but the Income Tax Act specifies certain limits.

The income tax department guidelines outline the permissible limits for owning gold for individuals based on marital status. A married woman can own a maximum of 500 grams of gold, while the limit for unmarried women is 250 grams. For men the threshold is 100 grams.

Nepal has no rules on gold ownership and taxation for a metal that is deeply rooted in the country’s culture and tradition.

There is no restriction on anyone owning gold in Nepal, Shakya confirmed.

Festivals also put more money in people’s pockets because employees get bonuses, and they usually spend on luxury items.

Tihar, one of the busiest times of the year for gold sales, has arrived but high prices could also deter buyers during the festival, Shakya said.

Nepalis buy gold mainly on two occasions: weddings and festivals such as Teej, Dashain and Tihar. Hindus consider it auspicious to invest in gold on festive occasions.

In an attempt to curb imports, the government started imposing 15 percent customs duty on gold imports based on the purchase bill of the current fiscal year.

Previously, the customs duty was a flat rate of Rs 8,500 per 10 grams.

On September 27 last year, the central bank doubled the import quota to 20 kg per day in response to demand from traders.

According to the Ministry of Customs, Nepal imported gold worth Rs51.53 billion in the last fiscal year. Imports of the yellow metal were worth Rs 63.19 billion in the fiscal year 2021-22.