KATHMANDU, Dec 31, 2012
Customers of gold in 2012 had to suffer from various problems due to
anomalies that crept into the country´s bullion market and impacts of
global economic instability.
First, the price of gold remained too volatile and continued to break past records consistently, making life difficult for general public.
When the year 2012 began, the market had opened with gold priced at Rs 44,840 per ten grams (Rs 52,300 per tola). But as euro zone´s debt crisis and upheavals in global currency market drove investors to safe haven, gold price soon rallied with intermittent downward spirals. By mid-June, the bullion traders were already announcing new records. The trend continued till the price hit an all-time high of Rs 53,025 per ten grams (Rs 61,850 per tola) on November 25.
By the time the year ended, gold was hovering at over Rs 50,000 per 10 grams. This mainly hurt middle and low-income groups, who, irrespective of the price, had to buy gold for marriage and other social events.
Secondly, the market continued to reel under acute scarcity of gold almost throughout the year, as government continued to cap its supply in a bid to discourage imports, something which was contributing to dent country´s trade gap and balance of payment.
Such demand-supply mismatch, meanwhile, brought in the third problem -- rise in smuggling of the yellow metal from two next-door neighbors - India and China. In the second half of the year, illicit import from China rose, as limited circulation of Indian Currency (IC) in the market prompted unscrupulous traders to smuggle it to India to get IC that has been selling for up to Rs 168 per IC 100 (Rs 8 higher than the official rate) in the informal currency market in Nepal.
“The scarcity had surfaced since the very beginning, but it deepened to a bitter level in the second half of 2012, inviting different anomalies such as smuggling and black marketeering of gold in domestic market,” Tej Ratna Shakya, president of Nepal Gold and Silver Dealers Association (Negosida), told Republica.
Latest in the series of gold smuggling, police confiscated 9 kg of gold in Kavre along Araniko Highway on December 4 and 3 kg of gold was found unattended at Tatopani Customs on December 17.
Gold supplies remained limited to 15 kg a day through around a dozen commercial banks, whereas daily demand stood at average 30-35 kg over the year.
“Amid short supply of gold, smuggling of gold recorded first time from China after many years. However, gold smuggling from India is frequent for many years due to open border with our country,” said Shakya.
Deepening shortage of IC in domestic market led to smuggling of the precious metal to the southern neighbor to earn IC which has been pricier in black markets of bordering towns.
“Though gold price in Nepali markets is higher by Rs 800 per tola compared to India, traders are selling gold for IC to earn more from it through black marketeering. We saw such a unique trend in 2012,” said Shakya. According to him, the ever lingering deficit also encouraged black marketeering of gold, making the precious metal more expensive by around Rs 1,000 per tola in comparison to the price recorded in international bullion market.
He also complained that the mismanagement of gold available in the market also resulted in the shortage. Though the gold distribution directives envisage that importer banks have to distribute the gold from eight different places outside the capital, they are issuing gold to dealer in limited cities.
Though the government attempted to control gold import, putting a cap of 15 kg per day, average import during the first four months of the year 2012/13 was worth Rs 74.56 million a day, up from Rs 70.6 million a day recorded during the same period of 2011/12.
Source: Republica
First, the price of gold remained too volatile and continued to break past records consistently, making life difficult for general public.
When the year 2012 began, the market had opened with gold priced at Rs 44,840 per ten grams (Rs 52,300 per tola). But as euro zone´s debt crisis and upheavals in global currency market drove investors to safe haven, gold price soon rallied with intermittent downward spirals. By mid-June, the bullion traders were already announcing new records. The trend continued till the price hit an all-time high of Rs 53,025 per ten grams (Rs 61,850 per tola) on November 25.
By the time the year ended, gold was hovering at over Rs 50,000 per 10 grams. This mainly hurt middle and low-income groups, who, irrespective of the price, had to buy gold for marriage and other social events.
Secondly, the market continued to reel under acute scarcity of gold almost throughout the year, as government continued to cap its supply in a bid to discourage imports, something which was contributing to dent country´s trade gap and balance of payment.
Such demand-supply mismatch, meanwhile, brought in the third problem -- rise in smuggling of the yellow metal from two next-door neighbors - India and China. In the second half of the year, illicit import from China rose, as limited circulation of Indian Currency (IC) in the market prompted unscrupulous traders to smuggle it to India to get IC that has been selling for up to Rs 168 per IC 100 (Rs 8 higher than the official rate) in the informal currency market in Nepal.
“The scarcity had surfaced since the very beginning, but it deepened to a bitter level in the second half of 2012, inviting different anomalies such as smuggling and black marketeering of gold in domestic market,” Tej Ratna Shakya, president of Nepal Gold and Silver Dealers Association (Negosida), told Republica.
Latest in the series of gold smuggling, police confiscated 9 kg of gold in Kavre along Araniko Highway on December 4 and 3 kg of gold was found unattended at Tatopani Customs on December 17.
Gold supplies remained limited to 15 kg a day through around a dozen commercial banks, whereas daily demand stood at average 30-35 kg over the year.
“Amid short supply of gold, smuggling of gold recorded first time from China after many years. However, gold smuggling from India is frequent for many years due to open border with our country,” said Shakya.
Deepening shortage of IC in domestic market led to smuggling of the precious metal to the southern neighbor to earn IC which has been pricier in black markets of bordering towns.
“Though gold price in Nepali markets is higher by Rs 800 per tola compared to India, traders are selling gold for IC to earn more from it through black marketeering. We saw such a unique trend in 2012,” said Shakya. According to him, the ever lingering deficit also encouraged black marketeering of gold, making the precious metal more expensive by around Rs 1,000 per tola in comparison to the price recorded in international bullion market.
He also complained that the mismanagement of gold available in the market also resulted in the shortage. Though the gold distribution directives envisage that importer banks have to distribute the gold from eight different places outside the capital, they are issuing gold to dealer in limited cities.
Though the government attempted to control gold import, putting a cap of 15 kg per day, average import during the first four months of the year 2012/13 was worth Rs 74.56 million a day, up from Rs 70.6 million a day recorded during the same period of 2011/12.
Source: Republica
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