Gold Prices in Nepal Soar to Record Highs: Economic Implications and Smuggling Concerns Rise

The price of gold in Nepal has witnessed unprecedented fluctuations in recent years, reaching historic highs and raising concerns about the country’s economy and the growing shadow of gold smuggling. From 2075–76 BS (2018–19 CE) to 2081–82 BS (2024–25 CE), the price per tola (approximately 11.66 grams) has skyrocketed, reflecting both global trends and local policy challenges. On Chaitra 2, 2081 (March 16, 2025), the price hit Rs 175,200 per tola, only to climb further to Rs 176,000 the very next day, according to the Federation of Nepal Gold and Silver Dealers’ Association. While a slight decline is anticipated in the coming days, the rapid rise and fall of gold prices in such a short span have sparked debates about economic stability.

A Rollercoaster of Gold Prices

The journey of gold prices in Nepal over the past few years tells a story of volatility. In 2075–76 (2018–19), the maximum price reached Rs 105,000 per tola at its peak. By Chaitra 2079 (March 2023), it had climbed to a then-record high of Rs 110,000 per tola. The upward trend accelerated dramatically in 2081 (2024–25), with the price surging to Rs 170,700 per tola by the last week of Kartik (mid-November 2024). The latest spike to Rs 176,000 within months underscores a 67% increase from its 2075–76 peak, doubling in value over five years from Rs 75,000 per tola before the COVID-19 pandemic.

Analysts attribute this surge to a combination of global factors—such as geopolitical tensions, the Russia-Ukraine war, and post-pandemic economic uncertainty—and domestic issues, including Nepal’s reliance on imports and a weakening Nepali rupee against the US dollar. Gold, often seen as a safe-haven asset, has gained traction worldwide, pushing prices to new heights.

Import Quotas and Economic Strain

Nepal’s gold market heavily depends on imports, regulated by the Nepal Rastra Bank (NRB) through a quota system established in 2066 BS (2009–10 CE) to balance the country’s trade deficit and foreign exchange reserves. Until 2073–74 (2016–17), the daily import quota was capped at 15 kilograms. However, demand outstripped supply, particularly during festivals like Dashain, when consumption reportedly rises to 25–35 kilograms daily. In response, the quota was increased to 20 kilograms in Falgun 2074 (February 2018) and later to 25 kilograms.

Official data highlights the import boom: in 2074–75 (2017–18), Nepal imported 6,500 kilograms of gold through the banking system, up from 6,455 kilograms the previous year. By the first seven months of 2075–76 (July 2018–January 2019), imports rose by 15.9%, reaching a value of Rs 20.55 billion. In 2080–81 (2023–24), imports were valued at Rs 51.53 billion, despite periodic quota cuts to 10 kilograms aimed at preserving foreign reserves.

However, the quota system has failed to meet demand fully, driving some traders to smuggling. Commercial banks, the sole authorized importers, sell gold in kilogram batches, a volume unaffordable for many of Nepal’s estimated 20,000–23,000 small-scale jewelers. This gap has fueled an illegal trade, with smuggled gold entering via new routes like Rasuwagadhi (bordering China) and Tatopani, alongside traditional paths from the UAE and Qatar.

The Shadow Economy of Gold Smuggling

Recent seizures in districts such as Bara, Rasuwa, Nuwakot, Dhading, Gorkha, and Lamjung reveal a burgeoning smuggling network. The Rasuwagadhi border, a trilateral trade point connecting Nepal, China, and India, has emerged as a hotspot, with gold routed through Tibet and remote Himalayan districts like Manang and Lamjung. This marks a shift from earlier patterns, where smuggling was less prominent along these routes. Authorities suggest this illicit trade bolsters Nepal’s shadow economy, undermining legitimate markets and tax revenues.

Legal gold imports, sourced from countries like South Africa, the UAE, Hong Kong, and Switzerland, contrast sharply with smuggled supplies. Yet, despite NRB efforts to curb imports and discourage gold as an investment—allowing it only as collateral—the black market persists. Experts argue that without revising outdated regulations, smuggling will continue to thrive.

Economic Implications and Policy Challenges

The rapid fluctuation in gold prices is often viewed as a harbinger of economic distress. Nepal’s economy, heavily reliant on remittances and imports, struggles with a widening trade deficit. Gold imports, while culturally significant for weddings and festivals like Teej and Dashain, drain foreign reserves. In 2073 (2016–17), prices dipped to Rs 55,400 per tola amid global market corrections, but subsequent events—like Donald Trump’s 2016 US election win and ensuing market volatility—pushed prices upward.

Despite employing around 200,000 people in the jewelry sector, the economic benefits of gold imports remain limited. With billions spent annually, questions linger: where does all the gold go? Critics argue that a country importing such volumes should generate far more jobs—potentially millions—suggesting much of it is hoarded or funneled into informal channels.

The NRB’s quota system, while intended to stabilize the balance of payments, has faced criticism for its rigidity. Temporary reductions during crises like COVID-19 and floods have disrupted supply chains, while traders demand an increase to 50 kilograms annually to meet growing needs. Without a scientific basis for price regulation or a competitive market framework, Nepal’s gold trade remains vulnerable to external shocks and internal inefficiencies.

Looking Ahead

As gold prices hover near Rs 176,000 per tola, the NRB faces pressure to modernize its policies. Proposals to amend guidelines and foster a transparent, investment-friendly gold market have stalled, leaving the sector in limbo. Economists warn that unchecked smuggling and price volatility could further destabilize Nepal’s economy, eroding trust in financial systems and exacerbating inflation.

For now, Nepal’s gold saga reflects a delicate balancing act—between cultural reverence for the metal, economic necessity, and the challenge of curbing a shadowy trade. As the nation grapples with these dynamics, the soaring price of gold serves as both a symptom and a signal of deeper structural woes.