Gold continued to soar to dizzying heights as the Israel-Hamas war raged on, sending investors scurrying to safety. In the domestic market on Friday, the precious metal traded at an all-time high of Rs116,000 per tola.

According to international media reports, spot gold surged to $1,988.20 per ounce in the world market on Friday.

Gold prices were poised for a third consecutive weekly gain on Friday as the Middle East conflict kept investors drawn towards the safety of bullion despite a higher-for-longer US interest rate backdrop, international media said.

According to Reuters, the yellow metal is commanding a hefty geopolitical premium. It will need a continuous feed of concerning geopolitical developments to keep it afloat at current levels.

Spot gold has gained about 9 percent as investors sought refuge from the potential fallout of the Israel-Hamas war that escalated earlier this month. But the lingering prospects of US interest rates staying higher for longer have kept prices below the $2,000 ceiling last breached in May.

In Nepal, the price of gold had started rising since the beginning of the year. On January 24, gold hit a high of Rs106,300 per tola (1 tola=11.66 gm).

The yellow metal was trading at Rs75,000 per tola before the Covid-19 pandemic started in Nepal.

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.

On October 20, before the Dashain holidays began, gold closed at Rs115,500 per tola.

Gold traded at Rs113,000 per tola last Sunday. The price declined to Rs112,300 on Monday before slipping further to Rs111,900 on Tuesday. By Wednesday, the price had bounced back to Rs113,200 and kept climbing on Thursday to close at Rs113,700.

“There are higher chances that the price will rise further, and we expect it to reach Rs120,000 per tola soon,” said Manik Ratna Shakya, president of the Federation of Nepal Gold and Silver Dealers’ Association.

According to the association, the price of gold, which had been increasing since the beginning of October, had started to fall due to a stable dollar. But the war between Hamas and Israel sent crude oil prices haywire, and it can impact gold too.

Shakya said that festive gold sales were down by half this Dashain compared to last year because of the economic slowdown, declining purchasing capacity and rising bullion prices.

“Tihar is nearing, one of the busiest times of the year for gold sales; but the high prices may put off buyers during the second festive season too,” he said.

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.

"Observing the international market, there are less chances prices will come down and higher chances they will increase due to market uncertainties," Shakya said.

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.

Last year, gold prices ranged from a low of Rs92,500 per tola to a high of Rs98,000 during the period October to November.

The government began charging 15 percent customs duty on gold imports based on the purchase bill from the current fiscal year in a bid to stem imports.

Previously, customs duty was a flat Rs8,500 per 10 gm.

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

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

According to the Department of Customs, Nepal imported gold worth Rs51.53 billion in the last fiscal year. Imports of the yellow metal were worth Rs63.19 billion in the previous fiscal year 2021-22.