29 Oct 2013 Last updated at 08:24:53 GMT
MUMBAI (Scrap Monster): The Indian gold premiums are currently ruling at $120 to $150 per ounce over London prices. According to P R Somasundaram, Managing Director, World Gold Council-India, the exorbitant gold premiums in India have encouraged gold smugglers.
Indians trust gold as their traditional way of preserving wealth. Moreover, the good monsoon is expected to boost gold demand in the country. The gold demand is expected to reach its peak during the Diwali festive season which starts next week.
The clampdown on gold imports by the government and the Reserve Bank of India (RBI) has resulted in gold imports reaching almost ‘zero’ during the past few months. The acute shortage of the precious metal in domestic market has lead to unprecedented surge in gold smuggling. The huge gap between supply and demand is being partly filled by illegal traffickers who buy the gold overseas at a cheaper rate and sells it to domestic jewellers or bullion agents by evading tax.
According to WGC estimates, the gold smuggling has gone up by over 50% this year. While the official gold imports by the country during 2013 are estimated to be around 850 tonnes, the quantity of gold smuggled into the country may well cross 200 tonnes this year.
Author: Paul Ploumis