Galloping Gold Price

blog

The fascination with the value and beauty of gold is universal. Despite advances in technology and changing economic systems, the allure of gold has never dwindled. People continue to invest in and admire this precious metal for its timeless appeal and perceived stability. Most, if not all, central banks of countries worldwide keep reserves of gold due to its safety, liquidity, and return characteristics. In times of economic uncertainty, recession, or runaway inflation, its value has risen to record highs. This is exactly what happened when the COVID-19 upended the global economy. By mid-2020, gold had topped $2,000 an ounce for the first time as traders look for havens amid the raging pandemic. The concern over tensions between Washington and Beijing also contributed to the price rise. 


In early 2022 when the Russia-Ukraine conflict broke out, gold price galloped to a new high. The war prompted the Russians to buy increasing quantity of gold as a hedge against growing economic concerns, driving its price higher. On the other hand, the US and its allies, in an effort to 'cripple' the country's war machine, warned the international gold traders against buying gold from Russia, a major gold producer.  More recently, geopolitical tensions coupled with global economic turmoil are fueling the price to scale new heights of $2,415 per ounce this month from $1,928 per ounce in September 2023. 


One country is said to have played an outsize role in this latest price rise: China. As lacklustre performance of real estate and stock market in China continue to dent investors' confidence in the sectors, experts say, more and more Chinese are flocking to gold as a safe investment. Moreover, the country is on gold-buying spree, which is aimed at diversifying its reserve funds and reduce its dependence on US dollar.


There is one more major factor sending the price soaring: stubbornly high inflation. The war in Ukraine and Israel-Hamas conflict have pushed the price of oil higher, increasing the price of virtually all commodities and unleashing inflation the world over. When currencies lose their purchasing power, the allure of gold soars higher. That's because it is seen as something which retains its value, so works as a hedge against inflation.     


The global increase in its price has directly impacted Nepal's gold market, setting the new record in domestic market at Rs. 140,900 per tola, up from Rs. 130,300 last Friday. Devaluation of Nepali currency against USD has also played a role in the rise. Against this backdrop, the odds of the country seeing rise in gold smuggling have increased. Not long ago, with the busting of smuggling rackets one after another, Nepal gained the notoriety as the hub for transnational gold smuggling. 


The seemingly insatiable appetite for gold in Indian markets is no secret, and now the demand in China is also growing aggressively. Sandwiched between the two giant neighbours, Nepal has long been used as a transit to smuggle every kind of goods to and from these countries – from red sandalwood to textiles to gold – by countless smugglers. When such illegal trade happens bypassing the customs' radar, Nepal government loses out on critical revenue. In order not to let this happen, it should ramp up its vigilance through security agencies in every border entry point.

How did you feel after reading this news?

More from Author

Europe Angered Over Immigrants

Corruption Sapping Local Governments

Saraswati Pratikshya comes up with new novel

Acting President's Eid greetings