Tuesday, September 23, 2008
Thought to be one of the first known metals, gold has been coveted throughout history for its beauty, scarcity, malleability, and uncanny resistance to rust and corrosion. Centuries ago, gold's unique combination of properties - its sun-like color, its soft hardness, and, especially, its imperviousness to decay and corruption - imbued it with magical associations in the eyes of many. 
Gold and silver are considered necessary for ornaments for the Nepalese since long, due to cultural and traditional importance. Gold and silver ornaments are important in our social functions like marriage and in a number of other cultural and traditional programmes. Therefore, even the poor buy gold ornament due to social obligation. However, the continuous hike in the price of the yellow metal has created worries in the Nepalese market. Since, the price of Nepalese bullion market is totally dependent on international market; Nepalese can do nothing but to “wait and watch”. The rising international price has pushed the local price sky-high despite low local demand. Weakening of the US dollar, plunge in the global stock market and the unstable price of the petroleum products in the international market has created this bullish trend and has made gold more attractive because the metal is a hedge against inflation. Slight slackness in the gold market is also attributed to stock clearance in UK.
Due to high market price of gold, insecurity, rise of polished gold ornaments and the low-income capacity of the people; gold market is in declining trend. Moreover, the gold business in Nepal is still being run in the traditional way. The gold is consumed mostly in the form of ornaments. People feel profitable in selling their own gold rather than purchasing from the local market. Therefore, demand for gold has gone down massively in the last 4-5 years. It has dropped down by over 90% and currently hovering around 5-10 MT per annum. With the price of precious yellow metal gone up due to continuous weakening of dollar and insecurity looming in the country consumers are finding hard to buy the gold and hoard them. Similarly, the purchasing capacity of the people is also on the lower side, which has encouraged them to purchase plated gold rather th
an pure one.
Retailers and wholesalers of this business are also finding hard to carry on this business due to the low demand and lack of security. They are pessimistic about the future of gold market. They are in complete dilemma whether to stay in the same business or to move on to some other productive sectors. It’s even hard for them to leave this field as well, as they have inherited this business from their forefathers.
Gold and silver are considered necessary for ornaments for the Nepalese since long, due to cultural and traditional importance. Gold and silver ornaments are important in our social functions like marriage and in a number of other cultural and traditional programmes. Therefore, even the poor buy gold ornament due to social obligation. However, the continuous hike in the price of the yellow metal has created worries in the Nepalese market. Since, the price of Nepalese bullion market is totally dependent on international market; Nepalese can do nothing but to “wait and watch”. The rising international price has pushed the local price sky-high despite low local demand. Weakening of the US dollar, plunge in the global stock market and the unstable price of the petroleum products in the international market has created this bullish trend and has made gold more attractive because the metal is a hedge against inflation. Slight slackness in the gold market is also attributed to stock clearance in UK.
Due to high market price of gold, insecurity, rise of polished gold ornaments and the low-income capacity of the people; gold market is in declining trend. Moreover, the gold business in Nepal is still being run in the traditional way. The gold is consumed mostly in the form of ornaments. People feel profitable in selling their own gold rather than purchasing from the local market. Therefore, demand for gold has gone down massively in the last 4-5 years. It has dropped down by over 90% and currently hovering around 5-10 MT per annum. With the price of precious yellow metal gone up due to continuous weakening of dollar and insecurity looming in the country consumers are finding hard to buy the gold and hoard them. Similarly, the purchasing capacity of the people is also on the lower side, which has encouraged them to purchase plated gold rather th
an pure one.Retailers and wholesalers of this business are also finding hard to carry on this business due to the low demand and lack of security. They are pessimistic about the future of gold market. They are in complete dilemma whether to stay in the same business or to move on to some other productive sectors. It’s even hard for them to leave this field as well, as they have inherited this business from their forefathers.
In the past, infamous baggage rule- a system allowing Nepali living abroad for at least six months to bring 10 kg of gold by paying existing taxes was in existence. The yellow metal used to enter into the country either through personnel serving in British Army or Royal Nepalese Army personnel who returned after serving in UN peacekeeping missions. Since they all were not reliable sources of gold supply, import of illicit gold from India had developed as an alternative source, which had squeezed the spirit of competition and skills of goldsmiths. In order to eliminate this problem, government of Nepal introduced a new provision to open gold import business under Open General License.
Under the OGL system, entrepreneurs were allowed to import any quantity of gold but they were not allowed carry it themselves. This new system allowed firms and commercial banks to import any amount of gold under stand-by LC (Letter of Credit) system.
After the concept of open general license (OGL) failed to yield positive results, Nepal Rastra Bank (NRB), the central bank, issued a circular under which representatives of registered firms can hand-carry any amount of gold while returning from abroad. The stock of gold brought into the country will be subjected to customs duty of Rs 13 per gram and no value added tax and local development tax will be imposed on such imports. However, the importer will have to inform about the incoming stock 24 hours prior to the exact time of arrival. . If anybody arrives with gold without prior information, the stock will be confiscated.
Benefiting with this new provision, private commercial banks like NIC and SCBNL launched the gold business in Nepal. NIC was the first commercial bank to offer 99.9% bars/coins to gold dealers (wholesalers and retailers), investors as well as to the general public. The bank offered minimum 100 grams of gold to the interested parties and custodial service under which buyers may choose to keep the purchased gold safely in the bank instead of taking the high risk of storing it at home as well. On April 2007, Standard Charter bank too started the gold business. The bank offered 9950 gold bar to the gold dealers which are imported from South Africa and U.A.E. Those who are interested have to take minimum 1 kg gold bar from the bank.
In Nepal, NEGOSIDA has actively participated in the development of gold business. Most of the retailers and wholesalers are the member of this association and follow the rules prescribed by it.
After the provision was introduced by the government, different financial inst
itutions is supplying with gold to local traders and general public. This has increased the level of supply of gold and its purity in the Nepalese market. Similarly, it has also brought a high level of transparency in the gold business and has helped establishing a new pricing mechanism in the market. But, even though the bank is supplying the pure gold, the customers are more interested in buying with external sources rather than bank. They are not even ready to accept the loan facilities provided by the bank while purchasing the gold, as they have to carry a bulk volume from the bank and the bank’s price are also comparatively higher than market price.
Thus, due to the unavoidable gold standard, the researchers can predict that the gold market has a good prospect in the future. Due to the decline in gold market since 4-5 years, gold dealers are pessimistic regarding this sector. But knowing the fact that gold has its own standard, we can’t underestimate the opportunities of gold.
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Under the OGL system, entrepreneurs were allowed to import any quantity of gold but they were not allowed carry it themselves. This new system allowed firms and commercial banks to import any amount of gold under stand-by LC (Letter of Credit) system.
After the concept of open general license (OGL) failed to yield positive results, Nepal Rastra Bank (NRB), the central bank, issued a circular under which representatives of registered firms can hand-carry any amount of gold while returning from abroad. The stock of gold brought into the country will be subjected to customs duty of Rs 13 per gram and no value added tax and local development tax will be imposed on such imports. However, the importer will have to inform about the incoming stock 24 hours prior to the exact time of arrival. . If anybody arrives with gold without prior information, the stock will be confiscated.
Benefiting with this new provision, private commercial banks like NIC and SCBNL launched the gold business in Nepal. NIC was the first commercial bank to offer 99.9% bars/coins to gold dealers (wholesalers and retailers), investors as well as to the general public. The bank offered minimum 100 grams of gold to the interested parties and custodial service under which buyers may choose to keep the purchased gold safely in the bank instead of taking the high risk of storing it at home as well. On April 2007, Standard Charter bank too started the gold business. The bank offered 9950 gold bar to the gold dealers which are imported from South Africa and U.A.E. Those who are interested have to take minimum 1 kg gold bar from the bank.
In Nepal, NEGOSIDA has actively participated in the development of gold business. Most of the retailers and wholesalers are the member of this association and follow the rules prescribed by it.
After the provision was introduced by the government, different financial inst
itutions is supplying with gold to local traders and general public. This has increased the level of supply of gold and its purity in the Nepalese market. Similarly, it has also brought a high level of transparency in the gold business and has helped establishing a new pricing mechanism in the market. But, even though the bank is supplying the pure gold, the customers are more interested in buying with external sources rather than bank. They are not even ready to accept the loan facilities provided by the bank while purchasing the gold, as they have to carry a bulk volume from the bank and the bank’s price are also comparatively higher than market price.Thus, due to the unavoidable gold standard, the researchers can predict that the gold market has a good prospect in the future. Due to the decline in gold market since 4-5 years, gold dealers are pessimistic regarding this sector. But knowing the fact that gold has its own standard, we can’t underestimate the opportunities of gold.
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