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Gold smuggling hits 50 tonnes in India as 15% import duty widens price gap

By · Via Times of India · Published by Everything Blog

In short

The World Gold Council reported that recent tax changes increased the landed cost of official imports, driving illicit inflows higher. Although overall gold demand rebounded 24% sequentially to 162 tonnes on the back of seasonal jewellery purchases, it remained 29% below year-ago volumes. High prices have widened the gap between value and volume, with gold spending up 3% year-on-year for the first nine months despite lower total tonnage.

Key points

  • India's decision to raise gold import duties from 6% to 15% has fueled a massive surge in…: India's decision to raise gold import duties from 6% to 15% has fueled a massive surge in unauthorized imports.
  • Total gold spending rose 3% year-on-year in the first nine months, showing that consumers…: Total gold spending rose 3% year-on-year in the first nine months, showing that consumers are paying more for less metal.
  • Anticipated festive and wedding demand in the December quarter may offer near-term suppor…: Anticipated festive and wedding demand in the December quarter may offer near-term support against persistent price headwinds.

Sources checked by our analysis pipeline: 1

India, the world’s second-largest gold market, is seeing a significant change in the way gold enters the country. The increase in import duty from 6% to 15% has made official imports more expensive, prompting a sharp rise in unofficial supplies. At the same time, record

gold prices are putting pressure on consumer demand.

According to a World Gold Council report, gold smuggling is estimated to have climbed to around 50 tonnes in the September quarter, compared with just three tonnes in the same period a year earlier. The surge highlights how higher import costs have had unintended consequences for the market.

Gold smuggling up

Gold demand recovered 24% sequentially to 162 tonnes in the previous quarter, supported largely by seasonal jewellery purchases. However, demand remained 29% below its year-ago level, as high prices continued to deter many buyers.

Spending patterns told a different story. In the first nine months of the year, expenditure on gold increased 3% year-on-year and 38% sequentially, suggesting that consumers are spending more even though they are purchasing smaller quantities.

Jewellery accounted for much of the…

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