Gold sales are down uncharacteristically in the midst of the festive season because bad economic times have made Nepalis stingy, the Federation of Nepal Gold and Silver Dealers’ Association said.

Bibek Shakya, proprietor of Shree Shakya Jewellery at Dillibazaar, remembers the good old pre-Covid days when a stream of customers would elbow their way into his shop.

When the pandemic hit, he had to shutter his store and wait it out. Post-Covid, demand for gold jewellery started to pick up gradually.

“This is the worst time. There are no customers at all,” said Shakya. One of the year's biggest festivals Dashain begins on Sunday, but Shakya does not see any hope on the horizon.

“Gold jewellery sales have plunged by more than 50 percent from last year.” He says the price of gold hasn't risen much since last year, but still people are not buying it.

Insiders say that demand for the precious metal is down in Nepal, opposite to what is happening in the rest of the world. Gold prices have surged this week in response to the Israel-Hamas war as people rush to buy gold.

International media reports say that the war in Israel has prompted a move into safe-haven assets as investors closely watch events in the Middle East to gauge the geopolitical risk to markets.

“People in other countries buy gold during difficult times as it is considered a safe haven for investment,” said Shakya. Gold is a perfect hedge against international turmoil.

According to Shakya, the ongoing economic crisis in Nepal has subdued demand.

Nepalis buy gold especially on two occasions—marriages and festivals like Teej, Dashain and Tihar. Hindus consider it auspicious to invest in gold on festive occasions.

Festivals also put more money in people's pockets as employees get bonuses, and they usually splurge on luxury items.

Bullion traders said that gold demand was slow during the recent Teej festival too compared to past years. Sales were down during the wedding season.

Gold traded at Rs107,600 per tola last Sunday in Nepal. The price rose to Rs108,600 on Monday before gaining Rs300 per tola to settle at Rs108,900 per tola on Tuesday.

The price of the yellow metal dipped slightly to Rs108,800 on Wednesday before surging to Rs109,500 on Thursday.

On Friday, gold closed at Rs110,100 per tola.

Nepali gold traders say that the price may rise on the heels of ongoing geopolitical tensions. The price had reached a record high of Rs113,600 per tola in mid-July.

Manik Ratna Shakya, president of the Federation of Nepal Gold and Silver Dealers’ Association, said that daily demand for gold reached 30 to 35 kg during the last festival season. This year, demand remains low at around 25 kg.

Gold sales are also taken as an economic indicator to determine the status of the people and the market.

“Low gold demand means the income of people has fallen and economic activities have contracted,” said Manik Ratna Shakya.

Domestic bullion traders still hope that demand will increase slightly because there are a few more days before the festival starts.

“As there is still a week left before the formal start of the Dashain festival, we expect daily demand to reach around 30 kg,” he said.

On the international front, the price of gold rose to $1,889.59 per ounce from $1,831.70 on October 2.

The geopolitical tension between Palestine and Israel has increased the potential of gold and silver, boosting it as a safe haven, Nepali traders say.

As expected, the price of gold has crossed $2,000 per ounce in the international market and reached $2,014 per ounce.

The price will likely rise further due to market uncertainties, bullion traders said.

Nepal's gold import policy keeps changing as it is directly linked with the country's foreign exchange reserve. Nepal pays for gold imports in US dollars.

In March last year, the central bank slashed the daily import quota to 10 kg to prevent foreign exchange reserves from further depletion.

On September 27, the central bank doubled the import quota to 20 kg daily in response to demand from traders.

According to the Department of Customs, Nepal imported gold worth Rs51.53 billion in the last fiscal year. The country had imported gold worth Rs63.19 billion in the previous fiscal year 2021-22.

In a bid to stem imports, the government's budget statement for the current fiscal year stated that 15 percent customs duty would be charged on gold imports on the basis of the purchase bill. Previously, customs duty was a flat Rs8,500 per 10 grams.