Investment in Gold, Silver as Hedge up Five-Fold

With growing uncertainty in investment in other sectors amid deepening impact of global financial crisis and rising inflation, customers have started making investment in precious metals like gold and silver, traders say. They said that the purchase of gold and silver for stocks has increased by five-fold over five years.

“Earlier, investors used to be fully interested to invest in golden ornaments. Now, gold is regarded as a hedge against inflation to secure investment,” Tej Ratna Shakya, president of Nepal Gold and Silver Dealers Association (NEGOSIDA), told myrepublica.

Shakya said share of the gold purchased by the customers to secure profitable investment has increased to 25 percent as compared to around 5 percent in 2004.

“We have expected the imports of gold to increase during this fiscal year as compared to the fiscal year 2008/09 when the import was recorded at around 5,000 kg. But soaring bullion prices can bring a setback in imports this year as customers are expected to lower demands for the precious yellow metal,” added Shakya.

Similarly, sales of silver have also increased significantly in the market with the increasing use of silver in industrial purpose among domestic consumers, said Shakya.

On average, daily sales of silver hover around 100 kg, which is almost 20 percent higher than what was recorded a couple of years back.

“The diversified use of silver besides ornament purposes has pushed up silver demand in domestic market. The imports would further go up if we boost exports of silver ornaments by increasing their quality,” Shakya said.

The trend of using silver in industrial purpose such as photography, scientific research, medicine, electronic goods and decoration and even in furniture has raised demand of silver in Nepali market.

However, ballooning price of gold and silver in international market has offset the sales even during festive seasons as compared to the same period in the past years, according to the traders.

Shakya said sales of gold have dropped to an average of 10 kg per day, down from the average sales of 15 kg per day due to ever increasing gold prices in domestic as well as international market.

Price of gold in domestic market reached a new high of Rs 25,765 per 10 gram (Rs 30,050 per tola) on Oct 14, with international market price touching $1058 per troy ounce. Nepal imports gold and silver from Hong Kong, Singapore and the United Arab Emirates.