Jewelers start buying gold from banks as demand surges

KATHMANDU, Aug 13:

Gold traders have started purchasing gold from commercial banks as demand for jewelries picked up with the advent of major festivals.

Citing dwindling demand and influx of smuggled gold in the market, traders had lowered gold purchase from commercial banks significantly over the past couple of months.

Because this, Nepal Rastra Bank (NRB) -- the central monitory authority - had reduced gold supply quota to commercial banks by 5 kg to 15 kg per day on July 27.

Bankers have attributed the drop in demand from jewelers to increasing illegal trade of the yellow metal. “Illegal trade of gold has increased to such a scale that it easily meets the domestic demand,” CEO of one of the commercial banks told Republica. “As such illegally traded gold are comparatively cheaper, traders prefer such gold over legally imported gold.”

The CEO, however, said some traders have been visiting commercial banks in recent days to purchase gold. “We have been selling an average of 2 kg of gold to traders these days,” he added.

Officials of Nepal Banker´s Association (NBA) also said sales of gold through commercial banks have been increasing in recent days. “As demand in the market increases, traders have started purchasing gold from commercial banks. Gold purchase by traders during June/July was near to nil. Now, they are gradually clearing old stock,” Bhuvan Kumar Dahal, executive member of NBA, told Republica.

Meanwhile, traders say the demand for gold has increased to around 35 kg a day ahead of the Teej festival when women purchase gold jewelries. “The demand has been increasing since last week,” Mani Ratna Shakya, president of the Federation of Nepal Gold and Silver Dealers´ Association, said. “Traders have been collecting gold from commercial banks as per the market demand.”

He said traders didn´t purchase gold from commercial banks for the past couple of months after demand came down significantly. “Rise in good smuggling is not the only reasons behind this. There are several other factors,” he added. “Lack of uniformity in gold prices charged by commercial banks and the increasing trend of using jewelries among consumers are the other reasons.”

He also said commercial banks were keeping profit margin of as high as 1 percent even though NRB allows traders to keep margin of only 0.5 percent on imported price. “As gold supplied by commercial banks are comparatively expensive, some traders buy illegally imported gold,” Shakya added. He also demanded with the government to allow jewelers keep profit margin of at least Rs 250 per 10 grams on the price charged by commercial banks.

Traders are optimistic about better business prospects in the next couple of months. “Our business, which witnessed slackness for the past few months, is gradually picking up with the advent of festive season,” Ramesh Maharjan, president of Federation of Nepal Gold Silver Gem and Jewelry Association, said told Republica.

Source: Republica