Nepal’s gold dealers have predicted a further bullish trend, just as the precious metal surged to a new high of Rs167,400 per tola in the local bullion market on Sunday.

Manik Ratna Shakya, immediate past president of the Federation of Nepal Gold and Silver Dealers’ Association, said they have estimated that the gold price may cross the Rs200,000 mark by mid-2025, triggered by various external factors like geopolitical tensions and the US election.

International media reports say that an Iranian attack on Israel could influence gold.

Investors often seek safety during a crisis, directing their funds towards assets like gold. An Iranian attack could spark fears of regional conflicts, triggering investors to put their money into the gold markets. Such a surge may increase gold prices.

“Gold remains the safest haven asset globally today,” he said. “The impact of the geopolitical tension scenario increases the investors’ appetite for gold.”

Buying of the precious metal reflects rising interest in alternatives to the dollar-based financial system.

Over the past 12 months, the price of an ounce of gold on the international market has increased from $1,947 to $2,746, a gain of 41 percent.

In Nepal, gold has gained Rs50,400 on a tola, a rise of over 43 percent year-on-year.

The price of the yellow metal has more than doubled in the last five years. Before the Covid-19 pandemic started in Nepal, it was Rs75,000 per tola.

Shakya said that the interesting thing happening globally is that central banks, apart from the investors, buy gold nowadays.

According to a Financial Times analysis, consistent foreign central bank purchases have been an important driver of gold’s strength.

Such buying seems not just related to the desire of many to gradually diversify their reserve holdings away from significant dollar dominance despite America’s “economic exceptionalism”, according to the analyst.

There is also interest in exploring alternatives to the dollar-based payments system that has been at the core of international architecture for some 80 years.”

Global media analysis shows that economic and geopolitical uncertainty are positive drivers for gold due to its safe-haven status and the ability to remain a reliable store of value. Its low correlation with other asset classes means that it can act as insurance during falling markets and geopolitical stress.

The cases in Nepal are different.

According to Shakya, gold is not allowed for investment in Nepal, though it can be used for decades as collateral to borrow money from banks. Traditionally, people keep gold ornaments and jewellery as collateral at the local lender's to borrow money.

“As a result, when sales boom globally where it is allowed as investment, in Nepal, sales hit rock bottom,” said Shakya. “That means when gold prices go up, people don’t buy them.”

“Had it been allowed for investment purposes, it would play an important role in the economy and government’s tax collection,” he said, adding that the bullion associations have multiple times requested the government to allow gold as an investment vehicle.

People are not allowed to buy raw gold. The central bank exclusively allows commercial banks to import up to 20 kg of gold per day, and gold traders are allowed to buy a kg of gold at a time from the banks.

India regulates gold holding. There is no upper limit for holding physical gold (such as jewellery, coins, bars, etc.), but the Income Tax Act specifies certain limits.

The Income Tax Department’s guidelines outline permissible limits for possessing gold for individuals based on marital status. A married woman may hold up to 500 grams of gold, while the limit for unmarried women is 250 grams. For men, the threshold is 100 grams.

Nepal has no regulations on gold holdings and taxation for a metal deeply rooted in the country's culture and tradition.

There is no limitation on gold holding in Nepal by anyone, Shakya confirmed.

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

Tihar, one of the busiest times of the year for gold sales, is here but the high prices may put off buyers during the festival too, said Shakya.

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.

In a bid to stem imports, the government began charging 15 per cent customs duty on gold imports based on the purchase bill from the current fiscal year.

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

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

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 fiscal year 2021-22.