Nepal’s gold jewellery consumption dropped only three percent in 2024, despite record-breaking price hikes, according to a recent report.

This modest decline has raised concerns that the demand is being propped up by an unofficial flow of the precious metal from India.

The Gold Focus 2025 report, published last Thursday by the London-based consultancy Metals Focus, forecasts a sharper eight percent drop in jewellery consumption in 2025, largely due to soaring prices.

The report noted that jewellery demand in Nepal fell just three percent even as the global average gold price surged 23 percent.

“The demand was supported by consumers’ continued confidence in gold and also by discounted availability in the market, thanks to the unofficial inflow of gold from India,” the report said.

Market insiders estimate that Nepal’s annual gold demand is 15 to 18 tonnes, of which five to six tonnes are currently smuggled from India. Most of this smuggled gold comes in bars.

Additionally, about three tonnes of gold is recycled annually through consumers exchanging old jewellery for new pieces.

“The price of gold neared Rs200,000 per tola in April, and footfall in jewellery stores has already declined. On top of this, a new two percent luxury tax on gold jewellery sales will further dampen consumer sentiment,” said a market insider.

Bullion traders say Nepal’s high customs duty on gold—20 percent compared to six percent in India—has incentivised smuggling. This has created a market where gold prices are sometimes lower than official bank rates due to the influx of untaxed gold.

With the new luxury tax coming into effect, total tax on gold jewellery in Nepal will rise to 12 percent (10 percent customs duty and two percent luxury tax), compared to India’s combined tax rate of nine percent (six percent customs duty and three percent Goods and Services Tax).

Gold Focus warns that this discrepancy will continue to encourage the unofficial flow of gold from India.

The consultancy also predicted that gold prices could reach as high as $3,800 per ounce in the international market within a year. If that happens, due to price pressures, Nepal’s gold demand is expected to fall further to around 14 tonnes in 2025.

Meanwhile, the report noted that India’s jewellery consumption dropped two percent to 563 tonnes in 2024. It is further expected to decline by 13 percent to 489 tonnes in 2025 amid expectations of even higher prices.

Tej Ratna Shakya, former president of the Federation of Nepal Gold and Silver Dealers Association, said demand, already weakened, is likely to sink lower.

Prices are expected to continue rising due to geopolitical tensions, US tariff policies, and global economic uncertainty. Central banks around the world are increasing their gold reserves, while falling interest rates are drawing in investors.

Shakya criticised the government’s decision to impose the two percent luxury tax on gold sales, calling it poorly timed. “Prices are already sky-high, well beyond the purchasing power of average Nepalis. Imposing additional tax is impractical,” he said.

The luxury tax, introduced through the 2025-26 budget, will apply to every gold jewellery sale starting July 17. Previously, a two percent luxury tax was only imposed on purchases exceeding Rs1 million.

Shakya added that the demand for gold has plummeted to its lowest point since prices neared Rs200,000 per tola.

“People’s purchasing power has weakened considerably. The government needs to revise its tax policy to reflect this reality.”

He recalled that, before the Covid-19 pandemic, families of the bride and groom would typically buy around 10 kilograms of gold for wedding ceremonies, when prices were below six digits. That figure has now dropped to around 5–6 kilograms.

In Nepal, gold transactions peak during wedding seasons. Traders warn that the new tax could further reduce gold sales, ultimately hurting government revenue, contrary to the tax’s stated purpose of boosting income.

According to Shakya, customers will end up paying around Rs12,000 more per tola due to cumulative margins and taxes as the gold passes through banks, bullion traders, and retailers.

“Why would someone pay an extra six percent when prices are already at historic highs?” he asked.

He warned that the current situation will push more buyers toward border markets in India, where gold is comparatively cheaper. “Just as with other goods, domestic consumers will go across the border to buy gold jewellery,” he said.

As the yellow metal soars in value, the market is also witnessing a shift in consumer preference from 24-carat to 22-carat gold, which is more affordable. While 24-carat gold costs Rs200,000 per tola, 22-carat gold is cheaper by around Rs1,600.

Last Sunday, the gold market opened at Rs190,700 per tola after closing at Rs193,700 a tola on Friday. On Thursday (June 11), the metal was traded at Rs191,300 per tola.

Nepal’s gold imports have declined both in quantity and value. During the fiscal year 2023-24, gold imports dropped 47.34 percent in quantity and 40.88 percent in value from the previous year.