Gold price jumped Rs2,000 within two days to close at Rs61,500 per tola on Sunday at the local bullion market and is expected to rise further on the back of increased demand from local jewellery for the wedding season, according to gold traders.

The Federation of Nepal Gold and Silver Dealers Association had set the precious yellow metal price at Rs59,500 on Wednesday and Thursday. The annual budget announced on Wednesday evening hiked the customs duty on gold by Rs800 per 10 grams with immediate effect. As a result, gold price jumped Rs1,500 to close at Rs61,000 per tola on Friday.

Rameshwor Dangal, director general of the Department of Customs, said that the customs duty has been hiked to make the gold price on par with the Indian market in order to stop smuggling. He said that the gold price was relatively cheaper in Nepal before the budget announcement.

On Sunday, the gold price closed at Rs61,500 per tola, a hike of Rs500. Gold hit a record high of more than Rs63,000 per tola on August 28, 2013. The bullion traders said that the hike in price, however, has dented the market sentiment as the demand for gold dropped 20 percent on Sunday.

Tej Ratna Shakya, past president in the association, said the gold price may increase further due to increased demand during the wedding season beginning mid-June. “The impact of the hike in the customs duty and other international factors has become visible in the domestic market as customer footfall in jewellery shops has started decreasing,” he said.

“As soon as the price crosses Rs60,000 per tola, the demand for gold starts to fall in the domestic market,” said Shakya. “Customers are waiting to see a fall in price before to buying gold.”

According to Reuters, gold climbed to a seven-week high on Friday, and was headed for its first monthly gain in four weeks, as investors scurried into the safe-haven bullion following Washington’s shock threat of tariffs on Mexico, which heightened fears of a global downturn. Gold is considered a safe haven, and prices rise at a time of political turmoil.
Spot gold jumped 1.1 percent to $1,302.62 an ounce, having hit its highest since April 11 at $1,304.24. People are doing fear trade now and running towards gold, it said.
Shakya said that Indian currency has also depreciated against the US dollar which has also contributed to the rise of gold price in the domestic market.
According to him, the daily consumption of gold in the market stood at 30 kg before the price hike. “Now, it has dropped to 25 kg daily.”
“However, we expect demand to increase by mid-June with the start of wedding season,” Shakya said.
Likewise, silver was traded at Rs710 per tola on Sunday. Domestic gold prices are fixed mainly on the basis of bullion prices on the international market.