In recent days, the price of gold has been steadily declining. Along with the international market, prices in Nepal have also been falling.
Last Friday, gold was priced at NPR 180,300 per tola, but today it has dropped to NPR 173,800. Similarly, in the international market, gold that had reached as high as USD 3,165 per ounce on Thursday fell to around USD 3,000 by Monday.
On Thursday in the international market and Friday in Nepal, gold reached its highest price on record before it began to decline. As there is no strong fundamental reason for the drop, it is expected that the decline will end within a few days.
Global stock markets have been on a downward trend for several months, and it is believed that increased gold sales have been used to compensate for those losses.
Since gold saw a significant price rise over the past year, large institutional investors are believed to be selling gold to cash in profits or cover losses in other assets.
Additionally, U.S. President Donald Trump’s policy of imposing additional tariffs has excluded precious metals like gold. Earlier, expectations that tariffs might affect precious metals had driven up gold purchases, but after Trump’s policy exempted these metals, profit-taking is believed to have increased.
“After Trump excluded precious metals from reciprocal tariffs, sales increased,” said Kaynat Chenwala, Assistant Vice President and Head of Commodity Research at Kotak Securities.
Gold prices had been on a sharp upward trend for the past year. This rise had increased concerns over inflation and a potential economic slowdown. As a result, there has been selling pressure in recent days.
“There’s a lot of confusion and uncertainty in the gold market. In such a volatile and uncertain environment, it’s natural and necessary for investors to secure their investments or book profits,” Yeap Jun Rong, a market strategist at IG Group, told CNBC.
As global stock markets decline, fears of further recession have driven investors to hold onto cash. With the U.S. imposing additional tariffs on imported goods and other countries retaliating with tariffs on American products, fears of a global recession have intensified.
Normally, such fears increase the appeal of gold and drive its prices up. However, since gold had already reached high levels, profit-taking has started.
Moreover, as global stock markets have declined in recent months, investors are believed to be using gold to offset their losses.
“38% decline prediction is baseless”
John Mills, a strategist at U.S.-based Morningstar, has predicted that gold could drop by up to 38% from its recent peak of over USD 3,000 per ounce. According to his forecast, the price could fall to around USD 1,820 per ounce.
“There were several fear factors that pushed gold prices up,” Mills said. “But with expectations for further price hikes decreasing and trade normalizing, gold prices may return to previous levels.”
His forecast has been widely reported in Nepal and other countries. Based on his estimate, gold prices in Nepal could drop to NPR 111,000 per tola. Sensational headlines predicting gold to fall to NPR 100,000 per tola were drawn from this.
However, this prediction has been widely criticized as baseless. Mills is accused of completely ignoring the U.S.-initiated trade war and its potential consequences.
While he claims the expectation of rising prices is fading, signs actually point to further increases. After both the U.S. and other countries raised tariffs, Federal Reserve Chairman Jerome Powell admitted it would naturally increase inflationary pressure.
Powell stated, “The additional tariffs are higher than expected and have immediately increased the risk of inflation.”
With the risk of inflation rising, the likelihood of the Fed halting interest rate cuts has increased.
Rahul Kalantri, Vice President at Mehta Equities, has identified a major support level for gold between USD 2,978 and USD 3,000 per ounce. He stated that it is not yet time to predict a lower support level.
Based on his technical analysis, the gold price is not likely to drop significantly. On Monday, gold was trading at around USD 3,030 per ounce in the international market, and during trading, it found support at USD 2,978.
