Amid ongoing efforts by Indian authorities to monetize (read confiscate) the citizenry's precious metals (which we most recently detailed as an utter failure here [10] and here [11]), it appears the current suppressed low prices for gold have reignited demand and thus smuggling. Following the biggest seizure of smuggled gold earlier this year, The Guardian reports [12]a 42-year-old-man, claiming to be a government official, was caught smuggling$15,000 of gold bars (hidden in his rectum) after police noted him "walking suspiciously."
The man, now arrested on suspicion of smuggling, claimed to be Coordinating Secretary to the Ministry of Post, Postal Services and Muslim Religious Affairs.
More than 70 people have been arrested for smuggling gold in 2015 alone.
Seeing that the man was 'walking suspiciously,' airport security stopped to search him, custom's spokesman Leslie Gamini told the BBC. [14]
Officials found 400g of gold, in the form of four bars, hidden in his rectum.
The gold is reportedly worth around two million Sri Lankan rupees ($15,000)
As The Guardian details, [12] the latest apparent smuggling attempt follows a series of other incidents this year where people have concealed gold in their bodies. Officials said more than 70 people have been arrested this year for smuggling gold in Sri Lanka.
Smugglers typically buy gold from places where the precious metal is relatively cheap and where there are fewer trade restrictions, such as Dubai and Singapore, aiming to sell it on in India – the largest gold consumer in the world. The import duty for gold in India is high: currently 10% for a 100g bar.
Overall consumption was at 642 tonnes in India this year. Chinese consumption stood at 579 tonnes, according to the Thomson Reuters GMFS gold survey. “A fall in prices of gold in the recent months has been one of the reasons for the increased demand for gold in India,” Jayant Sinha, minister of state for finance, told local media.
When India first started trying to control gold imports in 2013, in an attempt to tackle a widening trade deficit, smugglers went to the extent of getting human mules to swallow nuggets or hiding gold bars in dead cows.
Earlier this year, police in the western state of Gujarat said they had made the single biggest seizure of gold smuggled into India after arresting six people attempting to leave an airport with 60kg of the metal flown in from Dubai.
In India, smugglers risk a jail term of up to seven years, although such a penalty is rare and the main deterrent is confiscation of the gold.
And, as we recently noted, [11] while the government continues to wonder why gold-holders aren’t flocking to offload their gold. But not to worry, it will eventually make sure any scheme works [15]:
“A finance ministry official said if banks fail to win over temples, the government could intervene directly as it is looking for a big boost to the scheme to keep both imports and the current account deficit under control.”
Shades of 1933 [16] all over again. One would imagine that outright gold confiscation from Hindu temples would result in massive protests and quite a bit of bloodshed. And while most rational people would assume that the government would be smart enough to avoid doing something so drastically stupid, this is the same government that developed the cockamamie gold monetization scheme in the first place. Never underestimate the idiocy of government bureaucrats, especially when those bureaucrats are trying to save face.
Let’s hope for the sake of the Indian people that their government learns its lesson and quietly shelves its futile attempts to monetize private gold holdings. If it really wanted to monetize gold, it would end any restrictions on the importation, transfer, and use of gold as money and allow markets to determine what money they wanted to use. Control is hard to give up, but the Indian economy would be far better off with gold as money instead of rupees.
