Why Doesn’t Bangladesh Free The Gold?

Why Doesn’t Bangladesh Free The Gold? by Rory – The Daily Coin

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Smuggling contraband is risky business – high risk, high rewards – usually. Smuggling narcotics or marijuana is one thing but smuggling gold!?

Smuggling gold into India has been going on so long it’s not clear when it first began. Since smuggling is an opaque operation that functions in the dark it’s not surprising there is not an absolute beginning date and the information gathered is spotty, educated guesses based on years of following the inflows and outflows of gold or whatever the smuggled item happens to be.

What we do know is gold is the 5th most smuggled item in the world. If you think about that this means it falls just behind most of the global narcotics that are smuggled – cocaine, heroin, marijuana and possibly xtasy or some other type of hallucinogen. Gold is smuggled more than cigarettes, food or money according to American Bullion.

Why would it be necessary to smuggle gold, why not just hop down to the local coin shop or gold dealer and pick up what one needs? The gold has to get to the coin shop or the gold dealer first. The gold that is resold at these shops comes from a variety of sources, including smuggled gold, individuals bringing their gold back to market and official gold coming through government or banking channels.

India is the second largest consumer of gold right behind China. India was the largest consumer of gold for decades until China began encouraging their citizens to acquire gold. India is the number destination for smuggled gold due to high tariffs, high taxes and insatiable appetite for the yellow metal.

No policy on gold import in 47 years source

Bangladesh, one of the largest cities in the world, is one of the largest gold markets in the world. Believe it or not, the Bangladesh gold community does not use “official” gold and has been dependent on alternative sources for gold for more than 50 years.

Even though there are no legal barriers in importing gold, no gold trader has imported one tola of gold since Bangladesh achieved its independence. There are no gold ores in the country either. Yet, the country has over 20,000 gold shops with more than 1 million artisans working in them.

In cities and in towns, gold jewellery shops are in demand. Gold worth lakhs of taka are sold every day, yet the amount of gold does not seem to diminish.

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“For the last 48 years, we have been demanding legality,” said Agarwal. “For 20 years, we have been demanding policies on gold. But we are yet to see any results.” Source

What a mess. Try to do the right thing and government, in their infinite wisdom (agenda driven policies) do not represent the people or the wishes of the people. I wonder why no one trusts government?

Once the gold is smuggled into a country there must be a buyer for the wares. When you have 20,000 gold shops in one city, my guess is there are plenty of buyers awaiting the arrival of the next shipment. If you have ever conducted any type of transaction involving contraband it’s not as simple as walking up to a complete stranger and asking them if they would like to purchase your wares.

The smuggled item is not as important as the fact neither party, in the beginning, knows the other. This can create tension and a whole host of other emotions that affect the transaction or prevent it from even happening. Remember, we are discussing gold, which is legal, but the path by which it has arrived is illegal. No taxes, no duties, no tariffs have been paid and the government does not know it is actually in the country. Governments want to track every ounce possible from the time it enters the country – be it mine supply or crossing the border –  they want to track every ounce we consume and prefer to know the exact location.

Image : India Today
Image : Representational Image; Source – India Today

The government wants to tell the people they are in charge and this is probably the reason for the massive disconnect in the reported numbers. Keep in mind the dealers/shop keepers are the ones handling the gold and it’s in their best interest to show they are selling a lot of product which naturally attracts other customers. The number in the very opaque market will never be accurate, once again, all we can report are educated guesses based on historical inflows and outflows of gold.

About 90% of the supply of gold is being fulfilled through smuggling. The rest is met up from the consignment through baggage rules.

Bangladesh has a demand for gold of 30-40 tons per year.

However,  the traders’ association’s President Gangacharan Malakar said the demand is 7-8 ton and it is met up through import.

“Some gold come through baggage rules. The rest of the demand is met up through old gold,” said Gangacharan.

Due to a complicated import process the supply of gold is less than the demand, which is why traders have to hike the price frequently, he said.

“We cannot import gold due to numerous complications. But the demand for gold is increasing in the market. As the demand is on the rise the price is increasing. Source

All smuggled gold that is seized by Bangladesh authorities is deposited into Bangladesh Bank. There has not been an auction of the seized gold since 2008 and what is currently known is there has been a total of 2,000kgs seized over the past 4 years! If we use the same trajectory of 500kgs seized annually and go back 10 years we see a total of 5.000kgs of physical gold. 5,000kgs of gold equals 11,000 pounds. Bangladesh Bank has been hoarding all the seized gold since the global financial meltdown in 2008 – not that it means anything, just an observation.

If the central bank sells the gold to the traders at a fair price it will meet the local demand and the government will also earn a lot of money.

The association urged the central bank to consider the issue and call for auction to sell the gold.

The association’s General Secretary Dilip Kumar Agarwala said: “Thousands of tons of gold are deposited to Bangladesh Bank. But we are not getting gold. The import of gold is also complicated. That is why we want to buy the smuggled gold.

“We gave letters to Bangladesh Bank several times. But it is not responding,” he said.

A recent study by Transparency International, Bangladesh (TIB) said the government faces revenue loss of Tk487-974 crore every year in gold sector as it is imported illegally. Source

What will be the fate of this seized gold? Why would the bank/government want to hold onto a barbarous relic when gold isn’t money and serves little purpose? Why doesn’t the Bangladesh Bank simply return the gold to the gold market through a sanctioned auction? What reason could the Bangladesh Bank be keeping all this gold from the open market? The real question is does the seized gold still reside in the Bangladesh Bank vault?

 

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The Daily Coin

Rory Hall, The Daily Coin and Gospel News Network. Beginning in 1987 Rory has written over 1,400 articles and produced more than 500 videos on topics ranging from the precious metals market, economic and monetary policies, preparedness as well as geopolitical events. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver, Gold Seek, SGTReport, and a great many more. Rory was a producer and daily contributor at SGTReport between 2012 and 2014. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Dr. Warren Coates and Peter Schiff, to name but a few. Don't forget to visit The Daily Coin and Gospel News Network to enjoy some of the best economic, precious metals, geopolitical and preparedness news from around the world.