As the liquidity rises, gold smuggling regains momentum

As the liquidity rises, gold smuggling regains momentum

With the increase in the cash flow in the economy, gold smuggling is on the rise. Gold smuggling had reduced after demonetisation because of lack of low liquidity.

According to research and consultancy firm GFMS (Gold Fields Mineral Services); gold smuggling has fallen between November 2016 and mid-March 2017.

According to the research, illegal gold was nearly 1.3 tonnes a week in last quarter of 2016. This number increased to 1.9 tonnes a week in the last few weeks of the current quarter.

To finance gold smuggling for getting dollars unofficially, The Havala Premium has required which is now at normal 3%. This premium was about 5.6 to 6% in December may be say during demonetisation.

Dollar was unavailable in the black market due to high premium at the time of note ban.

The inflows were happening even with high payment. This was to keep alive the smuggling chain. However, the smuggling is now on the height, analysts do not see sufficient space for it to grow.

GFMS’s lead analyst for precious metals- Sudheesh Nambiath said, “We see room for growth as very limited, due to the cash transaction limit of Rs 300,000, which naturally creates a fear of being caught when using cash above this limit. Nevertheless, this is currently more popular in tier-3 cities than in tier-1 cities.”

Gold smuggling has been increased due to import duty on gold. The import duty has risen to 10% in 2013 which has been leading to smuggling in range of 150-100 tonne every year.