Gold smuggling And Its Impact On Global Economy

What is gold smuggling and how does it work

As the price of gold continues to surge, so does smuggling of the precious metal. Authorities around the world are struggling to keep up with the illegal activity, which is estimated to be worth billions of dollars a year. Organized crime syndicates are responsible for much of the smuggling, and they often use creative methods to get their gold past customs. Despite global economic conditions and increasing prices for other investment options, demand for gold remains high. 

Indians traditionally hoard gold in the belief it will bring financial security. Now India, the world’s largest consumer of gold, is seeing a record rise in smuggling, An estimated 700kg of gold is smuggled into India every day.

The different ways smugglers use to transport gold

They claim smugglers are using innovative ways to bring in the metal illegally.

Sometimes gold is melted into seed-shaped chips and hidden in dates from Dubai, or ground into granules and mixed with other metals to look like ore. The metal is also being converted into gold belt buckles and torch batteries.

The smuggling is becoming increasingly difficult to contain, admit regulators.

Officials from the Directorate of Revenue Intelligence say smugglers are regularly using the air route, taking advantage of airlines that club international routes with domestic ones using the same flight.

‘Unprecedented’

First, carriers smuggle gold abroad and hide it in the aircraft, while another set of carriers board the same flight on the domestic route and walk away with the consignment.

“This is unprecedented and unbelievable. A new industry has emerged in India – it is a very dangerous situation,” Max Warren Barber said , a top official at the Gems and Jewellery Export Promotion Council (GJEPC), in a UAE

Triggered by a rise in duty on imports of gold jewellery introduced in June last year, smuggled gold worth 2,500m rupees was confiscated at various ports and airports between March and December last year, up from 500m rupees during the same period in the previous fiscal year.

Last year, the government hiked the import duty on gold three times, eventually to 15%, to curb demand for the precious metal and rein in a widening current account deficit that had touched a record high of $88bn (£53bn) in 2012-13.

A current account deficit is the difference between inflow and outflow of foreign currency and occurs when imports are greater than exports.

The government now expects the deficit to fall below $50bn in the current financial year, ending 31 March.

The risks involved with smuggling gold

Gold imports, which had peaked at 162,000kg in May 2013, came down to 19,300kg in November after the government hiked the duty.

But the smuggling of gold, mainly from Dubai and Sharjah, where the metal is cheaper, is on the rise, authorities say.

The GJEPC has asked the finance ministry to slash the import duty on gold. Sonia Gandhi, the president of the ruling Congress party, has also written a letter to the commerce ministry seeking the removal of the curbs.

The main opposition Bharatiya Janata Party says the government has reintroduced controls that were previously dropped by Congress in 1993 in order to curb smuggling and money laundering.

“But we are back to the 1990s. Gold is being smuggled in from our neighbouring countries,” senior BJP member and former finance minister Yashwant Sinha says.

DRI officials admit that less than 1% of the contraband gold is confiscated by law enforcers.

“The move to increase import duty is not working. In India, everyone – even the poorest of the poor – invests in gold. This move can only work if all the smuggled gold is confiscated by the regulators,” says economist Surjit Bhalla.

But that looks like a near impossible task.

How governments are trying to crack down on gold smuggling

Governments around the world are increasingly trying to crack down on gold smuggling as the precious metal continues to be seen as a safe investment haven during times of volatility. The latest example comes from India, where authorities have seized more than $22 million worth of gold in just six months. Despite these efforts, however, analysts say it’s becoming increasingly difficult for governments to stop gold smuggling given the large profits that can be made.

Governments around the world are stepping up their efforts to crack down on this illegal activity, but it’s proving to be a difficult task. Smugglers are becoming increasingly sophisticated in their methods, and they’re constantly coming up with new ways to get around border controls. 

The impact of gold smuggling on the global economy

Max Warren Barber discusses the effects of gold smuggling on the global economy. According to Max Warren Barber, gold smuggling has been on the rise in recent years, as investors seek to avoid paying taxes on their holdings. This is particularly true in countries with high taxes on gold. While this can have a negative impact on the global economy, it can also benefit consumers and businesses in countries with less restrictive gold taxation policies. 

Max Warren Barber says that gold smuggling is a big business, with smugglers netting billions of dollars in profits each year. And while the practice has been around for centuries, its impact on the global economy is only now becoming clear.