India sees a surge in gold smuggling as prices soar ahead of festivals
Recent reports indicate a significant rise in gold smuggling in India, a growing trend linked to soaring prices and festive demand. With the annual Dhanteras and Diwali festivals approaching, the desire to purchase gold has surged, prompting a resurgence in illicit activities.
Record High Gold Prices Fuel Smuggling
Gold prices in India reached an unprecedented 128,395 rupees for every 10 grams, reflecting a remarkable 67% increase this year. This increase renders gold smuggling highly profitable due to substantial margins, especially for operators in the grey market.
Smuggling Trends and Government Measures
Last year, the Indian government reduced gold import taxes from 15% to 6%, leading to a decrease in smuggling activities initially. However, the recent spike in gold prices and supply constraints has revived such operations.
- Smuggling attempts have surged at several airports across India.
- Illicit dealers can now liquidate gold within hours, highlighting the urgent demand.
- Market conditions have made the illegal trade enticing again.
Impact of Festivals on Demand
The Dhanteras and Diwali festivals are culturally significant occasions for gold purchases in India, seen as auspicious times to acquire the metal. This seasonal spike in demand intensifies competition among buyers, driving up premiums and creating supply shortages.
- Indian jewellers report that banks are struggling to meet demand, often charging premium prices.
- Premiums have reached approximately $25 per ounce, the highest levels seen in over a decade.
Statistics on Gold Smuggling
In the fiscal year 2024/25 ending in March, Indian authorities documented 3,005 cases of gold smuggling, seizing a total of 2.6 metric tons of the precious metal. This illustrates the ongoing challenges faced by law enforcement in curbing illegal gold trade.
Market Insights
A senior bullion dealer from Mumbai noted that increasing gold prices have made smuggling operations highly lucrative, enticing more individuals to engage in illegal activities. After import duties were lowered, previous margins for smugglers significantly decreased to 630,000 rupees per kilogram, but the recent price hike has changed this dynamic.
This surge in smuggling, driven by high gold prices and the cultural significance of the upcoming festivals, highlights the complexities of India’s gold market. As the demand continues, both the legal and illegal avenues for gold procurement will likely evolve further.
