Gold has always attracted trouble. But at $5,000 per ounce, it’s attracting the kind of trouble that funds wars.

Senior gold industry executives, including leadership at the World Gold Council, are sounding the alarm over what they describe as a full-blown smuggling crisis. Illicit gold flows now exceed an estimated $120 billion annually, driven primarily by artisanal and small-scale mining operations that operate outside any regulatory framework. The proceeds are flowing directly into conflict zones, bankrolling armed groups and criminal organizations across multiple continents.

The price problem nobody wanted

With gold surpassing $5,000 per ounce at points in 2026, the economics of illegal mining have become irresistible for operations in Latin America, Venezuela, Ghana, and other regions where oversight is thin and poverty is thick.

The World Gold Council has specifically drawn attention to the scale of these illicit flows and their corrosive impact on legitimate markets. The $120 billion figure is staggering in context. That’s roughly the GDP of Ecuador, flowing through shadow networks with zero traceability, zero taxation, and zero regard for the human cost at either end of the supply chain.

Artisanal and small-scale mining, often abbreviated as ASM, accounts for the bulk of this illicit supply. These operations range from subsistence miners working with hand tools to more organized outfits that use mercury and cyanide to extract gold from ore, poisoning waterways and workers in the process. When gold was trading below $2,000 an ounce, many of these operations were marginally profitable at best. At $5,000, they’re goldmines. Literally.

India’s import duty backfire

In May 2026, the Indian government hiked import duties on gold to 15%. The stated goal was to curb gold imports and protect the country’s current account deficit. The actual result has been a smuggling bonanza.

Gold smuggling into India is projected to exceed 100 tonnes in 2026. For comparison, the figure was approximately 20 tonnes in 2025. That’s a fivefold increase in a single year, almost perfectly correlated with the duty hike.

The 15% duty creates a simple arbitrage. Buy gold internationally at the global price, smuggle it into India, sell it at a slight discount to the official duty-inclusive price, and pocket the difference. At current gold prices, even a small percentage margin translates to enormous absolute profits per kilogram.

What this means for investors

The smuggling crisis introduces a layer of risk to the gold market that doesn’t show up on any price chart.

$120 billion in annual illicit flows represents a significant chunk of the overall gold market. That volume of unregulated supply creates pricing distortions that are nearly impossible to model. When a substantial portion of global gold supply moves through networks that don’t report trades, don’t pay taxes, and don’t comply with anti-money laundering regulations, the market’s price discovery mechanism is operating on incomplete information.

Legitimate supply chains are being undercut by smuggled gold that enters the market at below-market costs, since illegal operators don’t bear the regulatory, environmental, or labor expenses that compliant miners do. This puts pressure on margins for publicly traded gold miners, which could show up in earnings reports and share prices throughout the sector.

Investors watching this space should pay close attention to regulatory developments in India, the EU’s evolving due diligence requirements for mineral supply chains, and any moves by major refiners to tighten their sourcing standards.