Nepal's bullion traders started off the fiscal year by importing Rs3.17 billion worth of gold in the first month, which is more than 900 times what they imported in the same period of the last fiscal year.

Insiders say the flood of gold imports is a sign of rapidly rising consumer confidence and economic rebound.

Imports of the yellow metal had almost come to a dead stop after Nepal declared a lockdown in March 2020 to prevent the spread of the coronavirus.

During the period mid-July to mid-August, the first month of the last fiscal year 2020-21, gold imports sank to a historic monthly low of Rs3.47 million.

Gold imports during the whole of fiscal 2019-20 was down more than 60 percent year on year, reaching Rs13.63 billion, according to the Trade and Export Promotion Centre's figures.

Imports bounced back in the last fiscal 2020-21 to Rs27.48 billion. Before the pandemic, the country’s annual gold import bill came to Rs34.63 billion.

Bullion traders are upbeat about the rebound in gold demand.

“The robust demand is fuelled by purchases in preparation for upcoming festivals like Teej, Dashain and Tihar after the government eased the lockdown in June,” said Mani Ratna Shakya, a member of the Federation of Nepal Gold and Silver Dealers Association.

The second lockdown imposed on April 29 lasted till September 1.

“We believe demand for the precious metal could jump back to pre-pandemic levels by this fiscal year backed by increased economic activities following a drop in Covid-19 cases,” Shakya said. “The vaccination programme appears to be the key factor driving gold demand.”

As of now, 5.60 million Nepalis (18.67 percent of the population) have received the first jab of the vaccine and 5.01 million people (16.7 percent of the population) have been fully vaccinated.

Traders said gold and silver consumption rebounded sharply in the last fiscal year boosted by high remittance inflow. “The trend is continuing this year too,” said Shakya.

Despite the projection that remittance may take a hit due to the Covid-19 pandemic, Nepali migrant workers sent home a record Rs961 billion in the last fiscal year.

Gold dealers are optimistic that sales may hit a new record by the end of this fiscal year.

Although gold imports had recovered to some extent in the last fiscal year, sales were disappointing. Bullion traders said that due to localised lockdowns, gold sales were down 85 percent in the last fiscal year.

The swollen gold imports has raised concerns that the country’s already bloated trade deficit could increase further.

“But increasing demand indicates that consumer confidence is rising. The economy is rebounding,” said Shakya.

Nepal’s economic growth suffered a negative growth rate of 2.1 percent in 2019-20, the first time in nearly four decades, as economic activities sank to their lowest.

"With the easing of virus restrictions, people have started organising auspicious events and celebrating festivals that had been put on hold for the past one and a half years," said Manik Ratna Shakya, president of the Federation of Nepal Gold and Silver Dealers Association.

The price of gold has also decreased, prompting people to buy jewellery which they had been putting off because of the high prices.

The price on Tuesday as fixed by the association was Rs91,400 per tola. During the same period last year, fine gold cost Rs96,100 per tola.

Nepal imports most of its gold from Dubai, followed by Turkey and other countries.

“The last fiscal year saw the lowest transaction in decades," said Manik Ratna.

According to him, daily demand for the yellow metal across from the country hovers around 35 kg, which is still low compared to normal times. Nepal’s gold demand, before the pandemic, was more than 40 kg, he said.

“We expect daily sales to reach 40 kg by this fiscal year,” he said, adding that demand may hit new records based on the projection of higher remittance inflows.

Bullion traders have complained that the daily import quota of 20 kg is not enough. “The market is short of inventory. We have received complaints that there is a black market and traders are charging around Rs4,000 more per tola,” he said.

Dev Kumar Dhakal, spokesperson for Nepal Rastra Bank, the country’s central bank, said he was not aware about the specific reason behind the increasing demand of gold in the domestic market. “It can be because of the upcoming festivities.”

Dhakal said that as the markets had opened up and people’s income might have improved, demand for gold could have risen in a sign of economic recovery.