The gold market has been unstable for the past few months due to ongoing trade wars, economic uncertainty, and political upheavals in the international market.

The price of gold has increased by 678 US dollars per ounce in a month as investors are attracted to gold in search of safe investment due to instability. The price has increased by 42 thousand rupees per tola in the Nepali market.

When the Nepal Gold and Silver Merchants Federation set the price on October 1, the price of gold in the international market was 3 thousand 682 US dollars per ounce. Here, it was set at 2 lakh 16 thousand 100 rupees per tola. After that, the price continued to increase and reached 4 thousand 360 US dollars per ounce in the international market on October 31. The federation had set 2 lakh 58 thousand rupees per tola here. This price is the highest ever.

‘An increase of 42 thousand rupees per tola in a month is a record in itself. The reason for this is that investors are attracted to gold for safe investment and increase their investment. The demand for gold increased, the price increased unnaturally,’ said jeweler Tej Ratna Shakya. The federation did not set a new price on October 1. Buying and selling in the jewelry market was done at the same price as Friday (2 lakh 58 thousand rupees per tola). When the market opened on Sunday, the price of gold per tola was reduced by Rs 4,800 to Rs 253,200. The reason is the decline in the international market and the dollar exchange rate.

When the federation determined the price on Sunday, the price of gold per ounce in the international market was $4,282. After falling by $78 per ounce compared to last Friday, the price in the local market also decreased. The dollar exchange rate has also decreased. 'On Sunday, 1 US dollar was equal to Rs 142.35. On Friday, 1 dollar was equal to Rs 141.10. The reason for the decline in the price in the international market is the ceasefire between Gaza and Israel,' said jeweler Shakya. 'With the talk of US President Donald Trump calling for a ceasefire between Ukraine and Russia, there seems to be a correction in the market.'

Currently, the federation has been determining the price based on the international market as 75 percent and the Indian market as 25 percent. The market price is determined by taking the international market price, the dollar exchange rate, customs rates and 1 percent profit (50 percent for banks and 50 percent for businessmen).

International economists have said that the price of gold will reach 5,000 US dollars per ounce by December 2026. If the international market reaches 5,000 dollars per ounce, it could reach 300,000 rupees per tola in the Nepali market. However, experts say that the price could also decrease if there is a ceasefire, economic improvement, and an investment environment.

‘The main reason for the price drop on Sunday is the ceasefire. The international market is the selling pressure of gold. Due to which the price has decreased somewhat in the international market,’ said jeweler Shakya, ‘The correction is also projected to be about 10 percent. A 10 percent price drop could reduce the price by 20 to 25 thousand rupees per tola in the Nepali market.’

It is said that the price of gold could decrease further if there is a ceasefire between Hamas and Israel and Russia and Ukraine. ‘The price has been changing day by day. There is confusion in the market. It is also projected that the price could decrease to 200,000 rupees if there is a ceasefire and an investment environment,’ said Shakya. After the price of gold increased unnaturally, Nepalis have also increased their investment in gold, learning from foreign countries. The general public has bought gold rings, coins, etc. if they cannot afford them. Jewelry entrepreneurs say that the general public is trying to invest in gold because the investment environment in other sectors is not conducive.

The demand for gold has increased as Indian media has said that the price of gold will reach three lakh rupees, said Federation Senior Vice President Dayasharatna Shakya. “Even though the price is increasing day by day, people have chosen gold as a safe investment, that is why even though the price has increased, the purchase has not decreased,” Shakya said.

Following the increase in demand for gold, the National Bank has also increased the gold import quota. The daily import limit of 20 kg has now been fixed at 25 kg. “The instability seen in the international market has brought confusion to the local market. It is not possible to predict the price,” said Federation President Arjun Rasaili.

Why is the price of gold increasing in the global market?

Like other goods and services, the price of gold is determined on the basis of demand and supply. The demand and supply in the international commodity market in particular determine the price of gold. In the last few months, the demand for gold in the world market has been increasing continuously, which has led to its price skyrocketing. The price of gold also depends on factors such as the global market situation, the US dollar rate, interest rates, inflation, supply and demand, and political stability. When the US dollar weakens and instability increases, gold becomes more expensive. But when the dollar strengthens and interest rates increase, gold becomes cheaper.

When interest rates fall in large countries such as the US or when instability increases in the world market due to political reasons, investors choose gold as a safe alternative. In such a situation, the price of gold increases.

But when the US dollar strengthens or when banks offer high interest rates, investors sell gold. In such a situation, the price of gold decreases. In the case of Nepal, the demand for gold increases during Dashain-Tihar and the wedding months. While at other (normal) times, the price decreases due to decreased demand.

According to businessmen, there are various reasons for the increase in the price of gold. When the global economy is unstable, investors are attracted to gold for safe investment. US President Donald Trump's increase in customs duties on various countries also had an impact. Another reason is the policy of the US Central Bank (Federal Reserve Bank).

‘The Fed has reduced interest rates to 4 to 4.25, and there is pressure on it to reduce them further. Apart from the US, central banks in Canada, the UK, the European Union, Australia, Mexico, and Russia have also reduced interest rates,’ said Senior Vice President Shakya. ‘Investors invested in gold for high returns due to falling interest rates.’ Apart from these, another reason is geopolitical. Due to the ongoing war between different countries, investors have not been able to make safe investments. They have not been able to trust any country’s currency. This is also why investment in gold is increasing. Demand is increasing, which has helped increase the price.

Former Acting Governor of Nepal Rastra Bank, Krishna Bahadur Manandhar, says that three factors are responsible for the continuous rise in gold prices. First, the weighted average price of the US dollar has decreased by about 14 percent (devaluation), second, the increase in uncertainty in the global economy due to US customs duties, and third, the weakening of the Indian currency (ruin) against the US dollar. Manandhar said that the slowdown in the domestic economy and political instability have nothing to do with the increase in gold prices in Nepal.

‘The value of the US dollar has increased (overvalued) compared to the exchange rates of Nepal and India. But when compared to all currencies, the weighted average value of the US dollar has decreased by about 18 percent,’ he said, ‘Therefore, the decline in the value of the US dollar on average has increased the attraction of investors to gold.’

As the US economy continues to dominate the global market, especially after the US government increased customs duties in various countries, the economies of many countries have not been able to perform well. In such a situation, the attraction of investors to gold has increased, said Gunakar Bhatta, former executive director of Nepal Rastra Bank.

‘Due to the uncertainty created in the global market due to the trade war, investors are looking for a safe investment route,’ he said. ‘The Indian currency has weakened against the dollar based on the assumption that the Indian economy will weaken after the US increased customs duties on India, and this has also affected Nepal.’ However, the latest report of the International Monetary Fund (IMF) has shown that the Indian economy is not as weak as expected. The report states that the expansion of the Indian economy will be 6.5 percent, which is the fastest economic growth in the world.