Gold price swings raise questions over Nepal’s pricing system

Gold prices saw extreme volatility in recent days after reaching a historic record in the international market, while Nepal’s domestic rates adjusted unevenly, raising fresh questions over how local prices are determined.

On January 28 (Magh 14), international gold prices closed at an all-time high of 5,415 US dollars per ounce (31.1 grams). On that day alone, gold rose by 235.54 dollars per ounce, which is equivalent to about NPR 34,497 when converted using the same day’s exchange rate.

The sharp rise was reflected in Nepal’s market the following day. The Federation of Nepal Gold and Silver Dealers’ Association adjusted the price on Thursday, increasing the domestic rate by NPR 20,500 per tola (11.6634 grams) and setting the retail price at NPR 339,300 per tola.

However, the international market declined soon after. On Thursday, gold fell by 36.540 dollars per ounce, equal to about NPR 5,355. Despite this, the federation reduced the Nepali market rate by NPR 20,500 on Friday, bringing the price down to NPR 318,800 per tola.

Gold prices continued to slide sharply in the global market on Friday, dropping by 484.232 dollars per ounce, which translates to approximately NPR 71,104. The international decline was reflected in Nepal only on Sunday. Although the federation normally does not fix prices on Saturdays, it announced a new rate on Sunday, cutting gold by NPR 18,800 per tola and setting the price at NPR 300,000 per tola.

The downward trend continued into Monday as the federation reduced the price further by NPR 13,400 per tola. On the same day, the international market recorded another decline of 237.776 dollars per ounce, equivalent to NPR 34,924.

After consecutive falls, the Nepali market saw a slight increase on Tuesday, with the federation raising gold prices by NPR 3,700 per tola. That same day, international gold rose by 286.698 dollars per ounce, or NPR 41,895.

The upward movement continued on Wednesday, when international gold increased by another 124 dollars per ounce. The federation responded by increasing the domestic price by NPR 14,400 per tola, setting the rate at NPR 304,700.

Overall, between last week’s Thursday and this week’s Wednesday, international gold prices fell by 758.538 dollars per ounce, equivalent to NPR 111,338. During the same period, Nepal’s domestic gold rate dropped by only NPR 52,700 per tola, reflecting a significant gap between international movement and local adjustment.

The Federation of Nepal Gold and Silver Dealers’ Association is responsible for fixing the daily gold and silver prices in Nepal. However, the difference between international market trends and local pricing has long been a source of public criticism. Consumers frequently complain that prices rise immediately when global rates go up but fall slowly and by a smaller margin when the international market declines.

The mismatch appears more noticeable in the latest week’s sharp fluctuations, with critics arguing that the pattern suggests manipulation rather than fair adjustment. Adding to the concerns, the federation has also not published transparent weekly fluctuation data on its website during the period of heavy volatility.

Federation President Arjun Rasaili defended the pricing system, saying that Nepal’s gold rate is determined not only by the previous day’s international closing price but also by the international price recorded at around 10:30 a.m. on the day the rate is fixed. He said the federation uses that benchmark along with the exchange rate and other costs before issuing the retail price.

Bankers say other factors also create differences between international and domestic rates. Nepal Bankers’ Association CEO Anil Sharma said banks generally sell gold to traders by adding about 0.5 percent cost above the international market price. He explained that gold purchased by traders from banks at 10:30 a.m. can carry a different price than gold purchased later in the day due to real-time market changes.

Sharma said traders often set retail prices based on their purchase rates and added costs, which leads to wider differences in Nepal’s domestic market. He also acknowledged that the local market tends to reflect international increases more quickly than decreases.

Rasaili said the exchange rate plays a major role, as gold is traded internationally in US dollars while Nepal’s retail market uses Nepali rupees. He added that bank premiums fluctuate depending on supply conditions, and that the Nepal Rastra Bank allows banks to charge a service fee of up to 0.5 percent when selling imported gold.

He also said traders add their own margin, which can range from 0.5 percent to 0.7 percent. In addition, Nepal imposes a 10 percent customs duty on gold imports, which is included in the retail price. According to Rasaili, these costs combined make gold in Nepal around 11 percent more expensive than the international rate even under normal circumstances.

He said the federation updates its official gold and silver price every day at 10:30 a.m. and insisted the association does not manipulate rates based on market direction.

However, consumer rights activist Madhav Timilsina strongly criticised the practice, arguing that a business association should not be allowed to set market prices. He said such a system resembles cartel behaviour, which is prohibited under law, but remains largely unregulated in Nepal.

Timilsina claimed that domestic pricing does not align with the international market because traders set prices based on profit protection rather than market fairness, and said the lack of strict oversight has allowed the issue to persist.

The latest fluctuations have once again sparked debate in Nepal over transparency and regulation in the gold market, as consumers question why domestic prices do not consistently reflect international rises and falls.