The yellow metal was traded at Rs48,000 on Wednesday against Rs49,500 on the previous day. According to the Federation of Gold and Silver Dealer’s Association of Nepal (Fenegosida) which fixes bullion prices in the domestic market, this is the first time gold has dropped to this level since July 29, 2011. 

The price of gold in the international market fell to $1,094.80 per ounce on Wednesday from $1,105 a day earlier. International media also reported that gold prices dropped fell to a five-year low. A reduction in the customs duty on gold seems to have helped bring down its price in the domestic market.

This has increased interest among consumers to buy the precious metal. Gold has been in free fall since last week after the government slashed the import duty by Rs1,000 to Rs4,200 per 10 gram through the Financial Act. 

“As the government reduced the customs duty and the price has been falling significantly, we are seeing a rise in the number of customers since the start of this fiscal year,” said Rajan Adhikari, sales manager at Shree Riddhi Siddhi Jewellers, New Road.

According to Reuters, a looming rise in US interest rates, the first in nearly a decade, has dented gold's investment appeal, encouraging more sellers in the market after Monday's 3 percent rout, its biggest one-day drop since September 2013. 

Holdings in the world's biggest gold-backed exchange-traded fund (ETF), SPDR Gold Shares, fell for a fourth day on Tuesday, declining another 4.8 tonnes to hit their lowest since 2008. Its reserves have nearly halved from their 2012 peak.

Monday's selloff came on the back of huge volumes traded on the Shanghai Gold Exchange after investors dumped more than $500 million of bullion in New York in four seconds during early Asian trading hours. 

Physical demand has been sluggish despite this week's steep price drop. India is not rushing to pick up slack Chinese demand as would-be buyers wait for further price drops, with a wedding season lull and poor rains curbing appetite, according to Reuters.

Meanwhile, Tej Ratna Shakya, special member and former president of Fenegosida, said that a fall in international prices and reduced customs duty both contributed to the plunge in prices in the country. “Gold has been losing its shine among investors as the US dollar is strengthening against other major currencies with people investing in US dollars instead of gold,” he said.