Gold soars as virus fears drive investors to seek safetyLoss of income due to the lockdown forces Nepalis to sell their jewellery to cover living expenses.
Bullion traders say gold prices may soon reach six figures the way they have been setting new records every passing day. The precious metal traded at an all-time high of Rs91,000 per tola on Monday, up Rs14,000 from pre-lockdown days.
The yellow metal has been on an upward trajectory with savers seeing it as a solid investment amid the economic turmoil created by Covid-19. There is no letup in virus caseloads, and many countries are bracing for a second phase of lockdown.
Nepalis have been selling their gold holdings for living expenses as many of them have lost their jobs or are not being paid fully, said bullion traders. Self-employed people have lost their livelihoods as businesses have been shut down for months.
Reuters on Monday reported that gold jumped to its highest in more than a month on Monday as investors sought the safe-haven metal after surging coronavirus cases intensified concerns over a delay in global economic recovery.
Geopolitical tensions also supported the safe-haven asset amid developments in Hong Kong, as details of a new national security law for the territory showed Beijing will have overarching powers over its enforcement, the report said.
According to reports, global bullion analysts are also expecting the precious metal to soar to $2,000 an ounce later this year or early next year as gold can be a great support to hide from financial repression.
The new record is due to the current scenario created by Covid-19 and increasing cases of infection, said Tej Ratna Shakya, former president of the Federation of Nepal Gold and Silver Dealers' Association. “Globally, as there is no stock trading and other investment opportunities have evaporated, demand for gold is on the high side, and that is the reason why prices are rising.”
According to him, gold jewellery weighing a tola already costs more than Rs100,000 including the labour charge.
The increasing price has created a reverse impact in the domestic bullion market as there has been a gradual rise in the number of buyers selling gold, said Shakya.
Due to the economic downturn created by the pandemic and the price sky-rocketing, people are coming to sell their jewellery for household expenses, he said.
“Some people are in a wait and watch mode because they think the price may reach six digits anytime,” said Shakya.
The price has already reached $1,760 an ounce in the international market. Pundits predict that by the end of this year, it will cross $2,000 per ounce, said Shakya.
The Federation of Nepal Gold and Silver Dealers’ Association fixed the price of gold at Rs91,000 per tola on Monday, the highest on record.
After 76 days of lockdown, the bullion market reopened fixing the price at Rs87,400 per tola. Gold traded at Rs77,000 per tola in March before the stay-at-home order was issued.
Shakya said he had expected the price to hit Rs92,000 per tola by the end of 2020, but things have been moving faster that he had thought.
Domestic bullion prices also rose after the budget statement for the fiscal year 2020-21 raised the import duty. The customs duty on gold was jacked up by Rs2,000 per 10 gram to Rs8,500, and the new import tax has already been implemented.