After the government reduced the customs duty on precious metals, the price of gold dropped sharply in the domestic market on Monday.
In a notable single-day decline, gold prices fell by Rs. 15,900 per tola following the Cabinet’s decision to cut the customs duty on gold. As a result, gold is now trading at Rs. 151,300 per tola, down from Rs. 167,200 per tola on Sunday, according to the Federation of Nepal Gold and Silver Dealers’ Association.
Previously, a 20% customs duty had been applied, an increase from the earlier 15% rate introduced in the budget for fiscal year 2024/25. However, following a recent Cabinet decision, the customs duty was reduced to 10%, which has led to the sharp price drop in the domestic gold market.
Silver prices also saw a decline, dropping by Rs. 115 per tola on Monday. Silver is now trading at Rs. 1,845 per tola, down from Rs. 1,960 per tola on Sunday. The government has similarly lowered the customs duty on silver from 15% to 10%.
“The price has adjusted accordingly since Monday, following the government’s reduction of the customs duty to 10%,” said Diyesh Ratna Shakya, Senior Vice President of the Federation of Nepal Gold and Silver Dealers’ Association (FENEGOSIDA).
According to Shakya, the significant drop in gold prices is due to both the reduction in customs duty and a decline in international gold prices. “With the reduction in the customs duty from 20% to 10%, the price of gold in the local market has decreased by about Rs. 13,500 per tola. Additionally, the international price of gold dropped by US$ 46 per ounce on Monday, further contributing to a Rs. 16,000 per tola drop in the local price,” he explained.
The international price of gold was USD 2,716 per ounce on Sunday but fell to USD 2,670 per ounce on Monday.
In recent months, gold entrepreneurs had called on the government to reduce customs duties to curb the smuggling of gold into Nepal from India, where the customs rates were lower. India had reduced its customs duty on gold and silver from 15% to 6%, making gold cheaper in India than in Nepal and leading to an increase in gold smuggling. This shift caused a sharp decline in the amount of gold entering through legal channels in Nepal.
With the reduction in customs duties, Shakya anticipates a boost in the local gold trade. He noted that the high gold prices had led to a decrease in daily demand, with local demand falling below 10 kg. This, in turn, had put pressure on gold traders.
Over the past few months, rising international gold prices had set new records in Nepal. On October 31, 2024, the price of gold reached a historic high of Rs. 171,000 per tola in the domestic market.
