Gold price touches 3-year high
Dwindling confidence of international stock investors prime cause

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KATHMANDU, Feb 11: Propped up by the soaring international price of gold combined with a series of depreciation of the Nepali rupee against the greenback, the price of gold in the domestic market has bloated to touch the highest mark in the last three years.

The domestic gold price, which was Rs 7,460 per ten gram just a week ago surged dramatically to touch Rs 7,780 per ten gram today, recording an increase of Rs 320 per ten gram within a week.

The international gold price, which had been soaring slightly since last Thursday recorded an unprecedented jump on Friday and touched US$ 306.65 per troy ounce (1 troy ounce=31.103 gm) recording an overnight surge by around US$ 8. However, after hitting a two-year high, the international price declined slightly on Monday to touch US$ 305.10 per troy ounce.

Similarly, the continuing depreciation of the domestic currency against the American dollar is another major reason behind the price surge. Since Nepal imports all the precious metal by paying in convertible currency, any slide in the value of the Nepali currency directly leads the price to rise. The rupee vis-à-vis the dollar has depreciated by over 75 paisa within the last two weeks.

As experienced even in the past, the dramatic rise in the price has pulled down the overall domestic gold demand to a record low. "The average consumption has declined to remain at less than half the normal demand," says Tej Ratna Shakya, President of Nepal Gold-Silver Dealers Association. According to the concerned entrepreneurs, the average normal national demand of gold in Nepal stands at 30 kg per day.

Along with the dwindling gold demand, gold traders are facing another headache. "The sale of old gold stock and ornaments has skyrocketed in the past few days. While demand for the yellow metal has dropped sharply, people’s turnout to sell their old gold stock and ornaments has increased massively," says Tej Shakya.

Entrepreneurs now fear a possible cash shortage. "If the current trend of old gold sale continues, gold traders may be forced to stop buying gold due to cash crunch," says Niranjan Shakya, former president of the association.

Prior to the hike in the gold price last Thursday, the prices had remained fairly stable at Rs 7,400 for around two weeks. The gold price surged dramatically to cross US$ 300 per troy ounce breaking two years record on last Friday as a result of a poor performance by the rival assets such as stocks and hard currencies in the global market.

The per ounce price in the London, rose to touch US$ 306.65 on Friday from Thursday’s US$ 298.90 mainly due to the global downturn of major stock markets and deepening gloom in the Japanese economy.

The sudden crash of the energy giant Enron, which led to a huge financial loss to share investors, is one of the main reasons behind the sudden distraction of share investors from stock markets globally.

Similarly, poor performance by the Japanese economy added in the erosion of investors’ confidence, leaving investment on gold as the best and reliable alternative. The newly released Japanese economic data shows that household spending marked the steepest drop in almost 28 years in December while machinery orders fell 7.8 percent over the third quarter to 2.6 trillion yen.

Govt ready to remove floor price of carpet

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KATHMANDU, Feb 11: Minister for Industry, Commerce and Supplies Purna Bahadur Khadka has said that the government is ready to remove the floor price of carpet, provided the manufacturers are quality-conscious.

"The government is willing to remove the floor price of carpet, but the factors that forced the government to fix the price should be properly identified and addressed," said Minister Khadka in his inaugural speech of the second annual general meeting of Nepal Carpet Exporters’ Association (NCEA) here Monday.

He also urged the carpet weavers to accord top priority to quality in order to compete and survive in the international market.

"Foreign buyers, especially the Germans prefer Nepali handmade carpet to others, but they are very much quality conscious," he said sharing his experience while taking part in the Domotex fair recently held in Hannover, Germany.

He also said that foreign investors are willing to invest in the carpet industry in Nepal as Nepali carpet is very popular among the European buyers.

Minister Khadka also asked the business community particularly the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) to hold intensive discussion involving representatives of all political parties, trade unions and business community and submit a unanimous draft on Labour Act to the government.

"Come up with a unanimous draft on the Act the government will table it at the parliament as it is", he told the business community, adding that they need to form single organization for the products of one nature.

Kabindra Nath Thakur, President of NCEA said that they had warned the government of declining export of carpet but the government did not pay a heed to their plea. However, he appreciated the government’s decision of reducing the floor price of carpet, which has discouraged the hundi system and helped in making carpet export more transparent.

There has been a steady decline in the export of Nepali carpet over the past three years. In the fiscal year 1998/99 a total of 2604475.87 square meters of carpet was exported which came down to 2509452.43 sq. m in fiscal year 1999/2000 and further slipped to 2242692.93 sq. m in the fiscal year 2000/01.

He also suggested to restructure the foreign ministry in order to mobilize Royal Nepalese diplomatic missions abroad for the promotion of exportable goods and to raise sheep in Nepal in order to solve the problem of raw material for carpet.

Deepak Bajracharya, general secretary of NCEA, said that the Association has submitted proposals to British and New Zealand Wool authorities to jointly promote Nepalese carpet and British wool and New Zealand wool.

Jim Tomecko, representative of GTZ, a German Technical Cooperation, stressed on paying attention to four Ps in order to make Nepalese carpet more competitive. He said special attention should be paid to product, price, promotion and place and suggested to add value to those products and to remove floor price.

Rajesh Kaji Shrestha, President of Nepal Chamber of Commerce (NCC) pointed out the need to open up export/import bank to promote export business and to hold talks with the Indian government to operate the dry port in Birgunj.

Ravi Bhakta Shrestha, President of FNCCI, said that the private sector should help the government during national crisis but the government should also consult the business community before taking any decision that affect trade and industry.

Minister Khadka also gave away best exporters award to top ten carpet exporters on the occasion. Paramount Carpet Industry, Creation Export Nepal and Pranjali Carpet Industry are the first, second and third top carpet exporters respectively.