Rising gold prices in Nepal further impacted by increased customs duty

KATHMANDU: The price of gold in Nepal has hit a record high, reaching Rs 142,200 per tola, with a single-day increase of Rs 1,700 per tola on Friday. This surge is largely attributed to international market dynamics and further compounded by the recent increase in customs duty imposed by the Nepalese government.

Over the past week, the price of gold has surged by Rs 5,300 per tola, marking a significant increase. The Federation of Nepal Gold and Silver Dealers’ Associations (FENEGOSIDA) stated that the recent government budget for FY 2024/25, which raised the customs duty on gold from 15 percent to 20 percent, has had a direct impact on the domestic bullion prices.

“Amid the prevailing higher price of gold in the international market, the increased customs duty has directly affected the gold price,” read a press statement from FENEGOSIDA. The organization noted that the customs duty hike has exacerbated the already high prices driven by global market conditions.

In the first half of last week, the international price of gold increased due to a weakening US dollar and declining US treasury yields. However, the latter half of the week saw some moderation in prices internationally. Despite this, the domestic market continues to feel the pressure of both international trends and local fiscal policies.

Globally, gold prices have been on an upward trajectory for the past few months. International media reports indicate that since January 2024, the price of gold has surged by over 10 percent, largely driven by investors seeking a safe haven amid geopolitical uncertainties.

The soaring prices have had a notable impact on the demand for gold in Nepal. FENEGOSIDA reports a sharp decline in domestic demand due to the elevated costs. This decrease in demand has also been reflected in the import statistics.

Data from the Department of Customs (DoC) reveals that gold imports declined to 2,451 kg in the first 10 months of the current fiscal year, down from 2,566 kg during the same period in the previous fiscal year.

However, the value of gold imports increased by 11 percent to Rs 21.65 billion in the same period, indicating that while the quantity of imports decreased, the rising prices have driven up the total import value.

Silver has also seen price fluctuations. Last week, the price of silver increased by Rs 20 per tola, trading at Rs 1,875 per tola on Friday, slightly down from Rs 1,900 per tola on Thursday.

The increased customs duty on gold, announced as part of the government’s new budget, is aimed at raising revenue but has also contributed to the upward pressure on gold prices.

This move has raised concerns among traders and consumers alike, as the higher costs could further dampen demand and impact the broader economy.

The FENEGOSIDA continues to monitor the situation and advocate for measures to stabilize the market and ensure fair pricing. As global uncertainties persist and domestic fiscal policies evolve, the gold market in Nepal remains in a state of flux, reflecting broader economic challenges and trends.