Demand for gold has seen a surge despite the hit to incomes and a society stressed out by the prolonged coronavirus pandemic, traders said.

According to bullion dealers, the gold rally reflects improving business confidence following economic uncertainty. The ongoing wedding season is also one of the key reasons behind the rush, they said.

Tej Ratna Shakya, former president of the Federation of Nepal Gold and Silver Dealers’ Association, said daily gold demand hovered between 20 and 25 kg across the country, mainly due to the wedding season when jewellery sales soar.

In Nepal, gold jewellery is a traditionally and culturally essential accoutrement during wedding celebrations when women put on their best ornaments. A middle class Nepali family usually buys 5 to 6 tolas of gold when there's a wedding. A tola is equivalent to 11.66 gm.

Traders said that demand started to pick up as marriages that had been put off since mid-April due to the lockdown restrictions were being performed en masse with the prohibitory orders being loosened.

Despite the rush, demand is still low compared to pre-Covid days when gold flew off the shelves at the rate of 30-35 kg daily, Shakya said.

The Federation of Nepalese Gold Silver Gem Jewellery Associations has requested Nepal Rastra Bank to increase the daily import quota of gold from 20 to 30 kg to meet an expected rise in sales after the market reopened.

Dev Kumar Dhakal, spokesperson for Nepal Rastra Bank, said that the central bank had been collecting suggestions and would come out with its decision in the upcoming monetary policy after studying market trends.

Traders said the gold rally would continue unabated till mid-July as there were auspicious wedding dates till then.

Kathmandu's bullion market that remained shuttered for nearly two months stirred back to life from Tuesday. The government in its latest prohibitory order has cautiously allowed gold shops to open from 11 am to 4 pm on Sundays, Tuesdays and Thursdays.

“As the vaccination drive has not started and the pandemic prevails, the limited opening hours decreed for gold shops is fine,” he said.

Bullion traders said that with the reopening of the bullion market in Kathmandu Valley, a good number of customers were seen at major gold shops.

Though footfall at gold shops has increased, Shakya said that the purchasing capacity had declined especially during the major wedding season compared to pre-lockdown days.

“Gold sales used to reach 40-45 kg daily during the wedding season,” he said. "Fewer people are coming to sell their gold jewellery amid the economic crisis caused by the pandemic and lockdown."

The price of gold was set at Rs90,500 per tola on Friday, according to the Federation of Nepal Gold and Silver Dealers’ Association.

Shakya said that prices had become favourable in recent days after hitting a high of Rs95,000 per tola recently.

The yellow metal declined to $1,700-1,800 per ounce in the international market after reaching $1,900. “The price is expected to hover around Rs90,000 for some time,” he added.

According to the Trade and Export Promotion Centre, Nepal imported gold valued at Rs21.20 billion in the first 10 months of the current fiscal year, recording a 55.5 percent year-on-year jump.

Banks stopped importing gold as the country went under lockdown on April 29. Last year too, imports stopped right after the stay-at-home order was issued, and banks started buying the yellow metal again only after the all clear was sounded.

“Banks have not started selling gold to traders till today,” Shakya said.

In April last year, Nepal Rastra Bank had slashed the daily gold import quota from 20 to 10 kg in a bid to stem the depletion of foreign currency reserves.

But responding to high demand in recent months, the central bank increased the quota to 20 kg on April 3 this year while bullion traders had been urging it to raise the limit to 30 kg.