Gold prices in Nepal are smashing records in 2025, but financial experts are sounding loud warnings: this glittering market could be a trap. While gold has long been a "safe haven," today’s market presents risks that many investors aren't prepared for.
Current Gold Price Trends in Nepal
In April 2025 alone, gold hit an all-time high of Rs. 197897 per tola after recent daily surges of Rs. 5,000–7,000. Compared to Rs. 75,000 per tola pre-COVID, prices have more than doubled. While media headlines celebrate the boom, volatility tells a darker story: sharp daily swings, unpredictable corrections, and a growing disconnect from fundamentals.
Gold Price in India and Regional Comparison
India, Nepal's closest trade and cultural partner, recently also slashed its gold import duty to 15%. This had a cascading effect on Nepal's pricing structure. Historically, the higher duty in Nepal led to significant smuggling from India. With both countries now having narrowed the duty gap (10% in Nepal vs. 15% in India), the scope for illegal gold imports has reduced but not disappeared. The price differential, while smaller, still enables some level of arbitrage, especially in border areas like Butwal, Birgunj, and Nepalgunj.
Despite these efforts, the supply limitations imposed by the Nepal Rastra Bank continue to inflate domestic prices. The NRB restricts gold imports to just 20 kilograms per day for commercial banks, and traders are limited to purchasing 1 kilogram each from these institutions. This restricted supply, combined with high demand, pushes Nepali gold prices above international benchmarks.
Why Is Gold So Expensive in Nepal?
Key drivers behind the surge include:
- Global tensions: Russia-Ukraine, Israel-Hamas conflicts have uplifted safe-haven buying.
- Central bank hoarding: China and other countries are aggressively stockpiling gold.
- Currency weakness: The Nepali rupee’s decline against the dollar makes imported gold even more expensive.
- Domestic tax burdens: A 10% customs duty and 5–10% making charges inflate local gold prices well above international norms.
Effect of Gold Price on Nepali Society and Economy
i. Cultural and Household Strain
Gold’s rising cost is having profound effects on families. Weddings, traditionally gold-heavy, now cost households 6–8 months’ income in jewelry alone—up from 3–4 months just five years ago. Some families are being pushed into debt or are downsizing ceremonies.
ii. Gendered Economic Impact
In many Nepali households, women hold gold jewelry as their sole asset. While rising prices theoretically improve its collateral value, the illiquidity during emergencies makes it a double-edged sword.
iii. Informal Lending and Pawnshops
The growing value of gold has also boosted Nepal’s informal lending market. An estimated 12,000 gold pawnshops operate nationwide, offering quick loans at interest rates between 18% and 24% per annum—well above bank rates. This sector thrives due to limited formal banking access in rural areas.
iv. National Trade and Revenue
Nepal’s gold import bill hit NPR 51.53 billion in FY 2023–24, a decline from NPR 63.19 billion in FY 2021–22. However, this drop is deceptive—unit prices have risen steeply, widening the trade deficit even as quantity imports shrink.
Can Gold Be a Legal Investment in Nepal?
Nepal is among the few countries where citizens are not allowed to legally treat gold as an investment asset. There are no gold mutual funds, ETFs, or government-backed sovereign gold bonds. Advocates and trade groups like FENEGOSIDA are lobbying for changes, citing India’s 2007 reforms that brought over $70 billion worth of privately held gold into the financial system.
If Nepal were to follow suit, it could:
- Improve liquidity for consumers
- Curb smuggling
- Increase financial literacy and inclusion
- Raise government revenue through taxation on gold profits
Why Experts Are Cautioning Now?
The biggest risk? Buying at the peak.
Rapid price spikes can trigger equally rapid collapses. Morningstar analysts warn gold could correct by up to 38% from these levels—a disaster for anyone buying today at inflated prices.
Moreover, Nepal’s unique market problems amplify risks:
- Liquidity hurdles: Physical gold is difficult and expensive to convert back into cash quickly.
- Hidden costs: Taxes, markups, and storage eat away returns.
- No modern investment vehicles: Unlike India, Nepal offers no gold ETFs, sovereign bonds, or regulated futures contracts.
Essentially, you’re locked into physical gold—a costly, illiquid asset—at a time of maximum market fluctuations.
Things to consider before investing in gold
If you must invest in gold, timing is everything.
1. Avoid peak buying seasons (festivals and marriages) when prices spike further.
2. Watch for temporary corrections, not just hype.
3. Monitor the Nepali Rupee vs. USD rate; a weakening rupee generally signals rising domestic gold prices.
4. But the wiser path might be diversification:
- Real estate in Kathmandu is appreciating at 27.7% annually.
- Mutual funds and fixed deposits offer 9–11% secure returns, without gold’s volatility.
- Future potential: Push for regulatory reforms allowing gold bonds or ETFs in Nepal.
Important Update on Gold Transactions in Nepal
Before you decide to invest, it’s crucial to be aware of the new compliance rules. The Nepal Rastra Bank has made KYC mandatory for all gold transactions. This regulatory shift aims to increase transparency in the bullion market and may impact how you buy and store gold moving forward.
Recommendations for Stakeholders
i. For Consumers
- Monitor platforms like Hamro Patro or Nepal Rastra Bank for daily fluctuations.
- Consider purchasing gold during off-season or monsoon periods when demand and prices tend to dip.
- Diversify savings by exploring other regulated assets like mutual funds or real estate, where feasible.
ii. For Traders
- Push for greater transparency in import data and real-time pricing updates.
- Advocate for policy reform to ease restrictions on gold trading and investment.
- Leverage digital tools to build consumer trust and compete with informal markets.
iii. For Policymakers
- Harmonize gold import duties with India to eliminate arbitrage opportunities.
- Launch gold monetization schemes to allow citizens to deposit jewelry in banks for interest.
- Legalize gold investment vehicles like ETFs and bonds to tap into household savings more efficiently.
Final Verdict
Gold will always carry cultural significance in Nepal—but as a financial investment in 2025, it’s overhyped. Today’s soaring prices may tempt many, but smart investors will recognize the warning signs: extreme volatility, liquidity traps, hidden costs, and no safety net.
The lesson is simple:
Don't put all your money where the fire is hottest—it might burn you.