Gold Price Surge in Nepal: Causes, Impacts, and Future Outlook

The price of gold in Nepal has been shattering records, reaching unprecedented heights and sparking widespread discussion about its economic and cultural implications. On April 22, 2025 (Vaisakh 9, 2082), the price of hallmark gold per tola (11.66 grams) soared to nearly NPR 200,000, before slightly declining to NPR 190,400 by Wednesday, April 23, 2025. This volatility, with daily fluctuations of NPR 5,000–7,000, reflects a global trend driven by geopolitical tensions, economic uncertainties, and shifting currency dynamics. However, the soaring prices are reshaping Nepal’s domestic market, reducing demand for gold jewelry, increasing public selling, and impacting government revenue.

Unprecedented Price Surge: A Timeline

The gold market in Nepal has been on an upward trajectory since October 2023 (Ashoj 2080). In the international market, the price per ounce rose from USD 1,864 in October 2023 to USD 3,035 by March 2025 (Chaitra 2081). In Nepal, the price per tola of hallmark gold climbed from NPR 106,500 on October 16, 2023, to NPR 176,400 by October 2024 (Ashoj 2081), and peaked at NPR 197,000 on April 22, 2025. This relentless rise has been punctuated by sharp fluctuations, with prices jumping NPR 1,100 per tola between March 30 and March 31, 2025, and reaching NPR 186,000 by April 12, 2025.

The international market mirrored this volatility, with gold trading at USD 3,108 per ounce on March 31, 2025, and climbing to USD 3,112.13 by the end of the year. Analysts attribute these swings to external factors, including U.S. policy shifts under President Trump, ongoing geopolitical conflicts, and central bank gold purchases, particularly by China.

Global and Local Drivers of the Surge

Geopolitical Tensions

The Russia-Ukraine war and the Israel-Hamas conflict in the Middle East have destabilized the global economy, prompting investors to flock to gold as a safe-haven asset. These conflicts have heightened economic uncertainty, increasing global demand for gold and driving prices upward. Additionally, fears of escalation—such as potential Russian nuclear threats or Iran’s reluctance to negotiate with the U.S.—have further fueled investor interest in gold. European warnings about the Russia-Ukraine conflict intensifying have also contributed to the price spike.

Central Bank Purchases

China’s central bank has significantly influenced global gold prices by purchasing 17.6 tons of gold in 2023–24 to bolster its reserves. This move, part of a broader de-dollarization strategy, has tightened global supply and pushed prices higher. Other countries, including India and Russia, have also increased their gold reserves, adding to the demand pressure.

Currency Dynamics

Historically, gold prices have an inverse relationship with the U.S. dollar: a stronger dollar suppresses gold prices, while a weaker dollar boosts them. However, recent trends defy this norm, with both the dollar and gold prices rising simultaneously. This anomaly is largely attributed to geopolitical uncertainties overriding traditional market dynamics. In Nepal, the weakening Nepali rupee against the dollar exacerbates the price surge, as gold imports become costlier. Meanwhile, the Indian rupee’s relative strength has had a marginal stabilizing effect, given that Nepal’s gold pricing considers the Indian market (25%) alongside the international market (75%).

U.S. Policy and Trade Tensions

The U.S. administration’s tax policies and trade disputes, particularly with China, have introduced further uncertainty. The U.S.-China trade war has driven gold prices to a record USD 3,357.40 per ounce on April 16, 2025, as investors seek refuge from volatile markets.

Domestic Market Impacts

Declining Jewelry Demand

In Nepal, gold is deeply embedded in cultural practices, particularly for weddings, festivals like Teej, Dashain, and Tihar, and religious ceremonies. However, soaring prices have dampened demand for gold jewelry. Traders report a slowdown in the jewelry market, with consumers opting to sell rather than buy. The high cost, compounded by 12–18% markups for labor, wastage, and profit, has made gold ornaments unaffordable for many middle- and lower-income families. Despite seasonal spikes during wedding and festival seasons, overall consumption has declined.

Public Selling Trend

As prices climb, more Nepalis are selling their gold to capitalize on profits or meet financial needs amid rising living costs. Traders note that buyers are outnumbered by sellers, reversing traditional market dynamics. This trend is particularly pronounced during economic slowdowns, as households liquidate gold to address financial pressures.

Reduced Government Revenue

Gold imports in Nepal attract a 10% customs duty and a 1% profit margin (split equally between banks and traders). However, the lack of value addition in gold trading limits revenue generation. Declining import volumes—due to government restrictions allowing only 20 kg of daily imports through commercial banks—have further reduced customs revenue. In the last fiscal year, Nepal imported gold worth NPR 51.53 billion, but the drop in quantity has offset potential revenue gains from higher prices.

Gold as Loan Collateral

Gold’s reliability as a safe asset has made it a preferred collateral for loans. By January 2025 (Magh 2081), banks and financial institutions in Nepal had disbursed NPR 69.29 billion in loans against gold and silver collateral, a NPR 15.97 billion increase from the previous year. Commercial banks alone accounted for NPR 63.88 billion, reflecting a NPR 15.35 billion year-on-year rise. Development banks and finance companies also saw increased lending against gold, underscoring its role as a trusted asset in Nepal’s financial system.

Pricing Mechanism in Nepal

Nepal’s gold prices are determined by a combination of international and domestic factors. The Federation of Nepal Gold and Silver Dealers’ Association sets daily prices based on:

• International Market (75%): Global spot prices in USD, adjusted for exchange rates.

• Indian Market (25%): Regional pricing trends in India, a major gold consumer.

• Additional Costs: A 10% customs duty, a 1% profit margin, and retail markups of 12–18% for jewelry.

This formula ensures that Nepal’s prices closely track global trends, with local factors like exchange rates and import duties adding to the cost.

Future Outlook

Analysts predict that gold prices could reach USD 3,500 per ounce internationally by mid-2025 if current trends persist, driven by ongoing geopolitical tensions and central bank demand. In Nepal, prices may cross NPR 200,000 per tola by mid-2025, as forecasted by Manik Ratna Shakya of the Federation of Nepal Gold and Silver Dealers’ Association. However, some experts anticipate a potential correction, with prices possibly dropping below NPR 100,000 if global conflicts subside or economic stability returns.

The volatility in gold prices sends mixed signals to Nepal’s economy. While it underscores gold’s role as a safe-haven asset, the declining jewelry market and reduced import volumes could strain traders and limit government revenue. For consumers, the high prices pose challenges for cultural traditions reliant on gold, potentially forcing families to adapt by reducing purchases or seeking alternatives.

The meteoric rise in gold prices reflects a complex interplay of global and local factors, from geopolitical crises to currency fluctuations and central bank policies. In Nepal, the surge has disrupted traditional market dynamics, with declining demand, increased selling, and limited revenue gains. As the world grapples with uncertainty, gold remains a beacon of stability for investors and a cultural cornerstone for Nepalis, albeit at a steep cost. Staying informed about global trends and domestic policies will be crucial for consumers, traders, and policymakers navigating this golden storm.