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Potentiality of Commodity
Market in Nepal
Nepal is one of the least developed
countries in the world where most of
the people are still investing major parts of their
wealth in traditional and lugubrious sectors like
land, house, jewallery, car etc. They prefer to
stock wealth in their safe boxes rather than to use
it in productive sector. In fact, they fear to lend
money for others as an investment too. This is due
to feeling of insecurity of wealth in the people.
How this insecurity has arises? Firstly, lack
of proper government(s) policies is prime reason
behind this unproductive financial practice.
The government’s policy is unable to attract the
investment which is ultimately having negative
impact in the country’s economy. As a result,
frequently unhealthy financial practice appears on
existence and genuine investor’s are losing their
hard saving. Such incident discourages investors
for further investment. Secondly, prime purpose
of investment is to span wealth through business
activities and to sustain the investment for long
run. In current Nepalese business circumstances,
it’s quite difficult to sustain business for general
investors. As the country is in the transactional
phase it’s been difficult to adopt and implement
new investment policies for the government.
Finally, it’s been difficult to start industries as
well because of cheaply imported product from
different countries. In these circumstances, Service
sector alone is not sufficient to provide ample
ground for much investors and competitors, as the
volume of the market is still small and dominated
by externals.
Trends in Gold Prices:
An Insight into the future!
Gold is a precious metal which is used both
as a property and as a financial asset.
Importance of gold has come until today increasing
its value and the area of usage. Gold was the
fundamental of the money system in the past and
then became a reserve tool pegged to Dollar. After
1973 some European Countries let their exchange
rate float against dollar and convertibility of
dollar against the gold ended and under these
circumstances gold has lost the property of being
a mean of exchange and become a personal saving
tool and a part of Central Bank Reserves. In the
recent years, demand of gold has expanded with the
widespread use of gold both in the industrial goods
and in the jewelry sector. However, developments
in the financial sector and the alternative financial
instruments have decreased the importance of
gold as a store of value. Afterwards, demand of
gold tends to increase in the recent years, after
the financial crises and individuals need for more
secure investment tools.
The above charts signify how gold has rallied
over last 10 years. Due to meltdown in the global
economic activity; investors, financial institution,
government has taken precious metals as safe
heaven. Due to its safe heaven perception gold prices
have remained strong over the last 10 years. Gold is
also regarded as the hedging tools for the investors
during the period of inflation. To hedge against
inflation central banks and also the institutional
investor tend to increase the holding of the gold
due to its safe heaven nature. Recent development
in gold price trend shows that the price of gold has
entered into downtrend. Prices have dropped so
sharply that recent technical approach shows gold
for further consolidation. It is hard to predict the
price movement in commodities; we have seen gold
Editorial Board: Ruchika Baidya /Shubhechchha Mulepati/ Sandip Nepal/Sharad Koirala
Mercantile Exchange Nepal Limited, Alliance Tower, 4th Floor, Charkhal, Dillibazaar, Kathmandu, Nepal
Phone: +977-1-4011542/43/44, Fax: +977-1-4011545/6 | e-mail: editor@mexnepal.com
MEMBER’S PERSPECTIVE
At the same time, stock market is being handled
by the only government exchange and still operate
in manual manner, where simple transactions takes
almost two weeks to get complete. Due to internal
and external effects and unhealthy business
practices, business companies are unable to boost
their business as it’s supposed to. As a result, stock that remain heavily dependent on a small range
value has been remaining bearish for last few
years.
In such circumstances, the commodity market
has shown some bright light for the Nepalese
investors to sustain in the Nepalese business sector.
Although, the practice of this market has arrived
quite lately, it has brought huge potentiality for the affect the lives of millions of people in the country.
potential Nepalese investors within the country.
It is an international standard business of
the modern age. In the countries like United
States, Japan, U.K. Australia, Germany, Ireland
commodity market is in practice for centuries
with active participation from investor. Emerging
countries like China, India, Brazil, South
Africa etc are also actively participating in the
commodity market which is also proved from
the rising volume of trade from these countries.
Although, commodity market is in practice for
long period, the entry of Nepal in this market is
quite late due to lack of modern technology in the
field of communication. A beauty of commodity
market is that genuine investors can participate in
this market in multi ways. A general citizen and
a businessman both could take part and invest
in the market according to their requirement.
Growing interest in commodity exchanges on
Monthly Charts showing 10 years Gold price action
the part of governments, donors, and the private
sector in developing countries reflect a drive
to reduce transactions costs and a need for new
commodity risk management tools. Improvements
in the institutions serving commodity markets
are especially important to developing countries
of commodities for export revenues. Growing
interest of governments and investors has
increasingly looked to commodity exchanges as
a means of managing risk in a liberalized market
environment.
The production of commodity and its trade
Therefore, development of commodity market
holds key to the poverty alleviation and overall
economic development of the country. The major
problem faced by the farmer and trader is related to
the price volatility and high marketing cost which
Volume: 5 • Issue: 1 • Year: 2013 A.D
shows the importance of the commodity exchange
where farmer and traders can mitigate the risk
related to price and can also market their product
effectively. Now Nepal is in transactional phase
possibly towards economic struggle. Commodity
Market could be a vital tool for our country to gain
economic growth. It requires strong and combines
power of government and private sector. This is
how its potentiality of Commodity Market for
Nepal and Nepalese could be justified.
Binod Pd. Timsina
M.D.
Shree Rajshyamaji Investment
& Trade Center Pvt. Ltd.
Kirtipur, Kathmandu.
Email: sitcnepal@gmail.com
has become quite logical for investment since it
has outperformed other assets class. However, the
current consolidation of the price of gold can also
be linked to the recent years gold price bubbled.
The biggest question or confusion that exist in the
investor mind is regarding the trend of the yellow
metal as its not sure whether it would go south or
north. However, the technical part suggests that
the gold would be heading towards south which
can also be conformed through daily, weekly and
monthly charts. It is hard to believe but fact is
that gold is still downtrend. Abundance of precious
metals investors are either scared or in panic. They
are still wondering if Gold is truly in a bubble or
the Bull Run in Gold prices is finally over.
The rise in Gold price has lasted thirteen
years or so (depending on which low one uses
as the main trough) and prices have managed to
rise from $250 towards $1900. In our opinion, the
most obvious support level at this point is at about
$1000. However, Support could easily be found
at higher side, but for now we can stick with the
$1000 while estimating the long term support level
for this precious metal. Similarly, in Long run,
the trend for gold is bearish, and the condition is
also supported by the fact that monthly chart is at
overbought zone; therefore, we have to assume that
outcomes will be negative until some improvement
is seen.
Pankaj Agrawal
Norex Pvt. Ltd.
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