Gold is considered as the most popular and secured investment. Investors trade and invest in gold for hedging against social, political and economic risk. After years of gains, the price of the gold is declining dramatically and it sank to 54,000 per tola on November 21.

The reason for decline in gold price is due to the strengthening of the dollar in the international market. As the U.S currency is appreciating, investors prefer to invest in dollar rather than in gold and silver. This decreases the demand of gold which leads to the decline in price. Finally, as the price of the gold in domestic market is determined by the international market, the price of the gold falls in Nepalese market.

During the past few years, the price of gold was steadily increasing but when the price of gold started to drop, buying gold seems to be unpredictable.

The other reason for decrease in price of the gold might be the hope for political stability and economic growth after the election. The domestic and foreign investors are adopting the strategy of wait and watch. There has been no new investment in Nepal; even the big investors are holding their cash instead of expanding their business. It also affects the investment in gold and silver which leads to decline in demand and the price fell.

There is high requirement of cash flow for the election campaign in Nepal that may create liquidity crunch thus increasing the interest rate of the financial institutions. So, due to high interest rate in market, investors are encouraged to keep their money in financial institution. This reduces the investment in gold and lessens the demand of the gold in the market. Due to decline in demand of the gold, the price diminishes.

The other reason might be the upward trend of NEPSE. Heated up by the election, the secondary market of Nepal this week came to set a new four years highest index. So, the investors prefer securities market rather than other sectors such as gold, silver, real estate etc. This may lead to decrease in demand of gold, thus declining the price.

The above are the some of the major influencing factors for the downswing of gold price. The other reason might be increment in investment in other sector, oil price fluctuations, political instability, etc.