Kathmandu:
The sharp rise in gold and silver prices in Nepal and across the world is primarily driven by the impact of wars, growing global insecurity, and declining trust in paper currencies, according to Mahendra Ratna Shakya, President of the Federation of Nepal Gold and Silver Dealers’ Association.
In an interview with Nepal News Bank, Shakya said that whenever the world faces crises such as wars, pandemics, earthquakes, or widespread insecurity, investors tend to move their capital toward gold and silver to safeguard their wealth. As a result, demand for these precious metals has surged in recent times, pushing prices significantly higher.
“This is not something new. For hundreds of years, during times of crisis, people have turned to gold and silver as safe assets,” he said.
Shakya explained that while demand for gold and silver has risen sharply, supply remains limited, leading to what appears to be an abnormal increase in prices. “Gold is a mineral extracted from mines; it cannot be produced in laboratories. Gold mines are gradually declining, while demand is rising excessively. This imbalance is directly contributing to price hikes,” he said.
He added that not only individuals but also major countries are now stockpiling gold and silver as ‘safe haven’ assets. “Even wealthy nations no longer fully trust their own paper currencies. History has shown that when states collapse due to war, paper money becomes worthless, while gold and silver retain their value,” Shakya said.
Citing the Iraq war as an example, he noted that the currency that was once strong during the rule of former President Saddam Hussein became almost worthless after the war. “Those who held gold and silver survived financially,” he added.
According to Shakya, conflicts such as the Russia–Ukraine war, the Israel–Hamas conflict, and tensions between China and Taiwan have increased a global ‘war mentality.’ This has weakened the traditional inverse relationship between the US dollar and gold. “Earlier, when the dollar strengthened, gold prices fell. That relationship no longer exists. Due to panic surrounding the dollar, both the dollar and gold prices are rising simultaneously,” he explained.
He further stated that major countries, including the United States, are increasing their gold reserves instead of relying solely on the dollar. “After the war, Russia lost assets worth billions of dollars. Fearing similar risks, countries like China are shifting reserves from dollars to gold and silver,” he said.
Jewelry Demand Declines, Physical Gold Demand Rises
In the Nepali context, Shakya said demand for jewelry-grade gold has declined, while interest in physical gold and silver has increased. “Instead of making new jewelry for weddings, people are increasingly exchanging, repairing, and reusing old ornaments,” he said. According to him, demand for making new jewelry has dropped by nearly 80 percent.
He described Nepal’s restriction on the purchase of raw gold by citizens as unfortunate. “Since 2010 (2067 BS), Nepal Rastra Bank has banned the purchase of raw gold, while raw silver is allowed. This is contradictory,” he said, adding that gold and silver are legally recognized as movable property under the Civil Code. He informed that a writ petition has already been filed at the Supreme Court regarding this issue.
Shakya warned that while global demand for gold and silver is rising, restrictive policies in Nepal are pushing the market toward informality. “People want to buy, but due to the lack of a proper system, problems are increasing,” he said.
Price Hike Reduces Overall Gold Demand
According to Shakya, gold and silver trading is now taking place in all 77 districts of Nepal. “Previously, trade was limited to 40–50 districts, but after the federal structure, the business has expanded nationwide,” he said. He noted that in the month of Mangsir alone, national gold demand stood at around 50 to 55 kilograms, whereas current daily transactions have dropped to around 10 to 15 kilograms due to the off-season.
He added that many people are now meeting their needs by exchanging or selling old jewelry. However, purchases for weddings, parties, and social rituals continue at a modest level.
Shakya also pointed out supply pressure caused by limited gold imports, as only two or three banks out of 18 are currently importing gold. “Even when a bank imports 50 kilograms of gold, traders have to wait a long time to receive it,” he said, citing instances where 85 to 125 kilograms of gold remained held at banks due to procedural complexities.
He predicted that this situation may persist for another three to four months. He also warned that further escalation in the Ukraine war, instability in the Middle East, tensions between Iran and Israel, or disputes between China and Taiwan could push gold prices even higher. “If a major country like Iran is dragged into war, both gold and oil markets could face massive turmoil,” he said.
Shakya noted that the United States holds around 8,000 tons of gold and, as the world’s de facto central bank, could intervene to influence prices, though it has not done so yet. He estimated a 60 percent probability that gold prices will continue to rise, with a 40 percent chance of price correction.
Silver Demand Accelerates
With gold prices crossing NPR 300,000 per tola, Shakya said demand for silver has increased rapidly. He attributed the sharp rise in silver prices to soaring industrial demand. According to the Federation, silver is no longer limited to jewelry, utensils, or religious use, but is now extensively used in solar panels, data centers, X-ray machines, cameras, electronics, and other high-tech industries.
He added that limited silver supply in China has further fueled global demand. “I see an 80 percent chance that silver prices will continue to rise, with a 20 percent possibility of correction,” he said, claiming that silver prices have nearly doubled over the past year.
Lack of Investment Options in Nepal
Shakya said that limited safe investment options in Nepal have made gold and silver increasingly attractive. “There is little enthusiasm in real estate, fixed deposits, or cooperatives these days. Since gold and silver prices rise daily, investor interest has grown,” he said.
As Nepal has no gold or silver mines, the country is entirely dependent on imports from markets such as Dubai, Italy, and Switzerland. He emphasized that cultural, religious, and social traditions also ensure continuous demand for gold and silver in Nepal.
According to Shakya, as long as war fears persist, countries continue stockpiling precious metals, and alternative investment options remain weak, gold and silver prices are likely to stay high.
