Setting Prices Beyond Global Markets

This system operates outside clear global pricing rules. Instead of global supply and demand, a few powerful players allegedly control gold prices in India, potentially setting artificial highs or lows. The market is said to be influenced by these dominant entities rather than solely international benchmarks.

The Alleged Import Monopoly

Whispers from Zaveri Bazaar, the historic heart of India's precious metals trade, point to a decades-old stranglehold over gold imports by a clandestine group. This alleged "cozy club" reportedly moves hundreds of tonnes of gold and silver annually through opaque consignment routes. Such a structure makes true price discovery difficult, leaving investors and consumers guessing at market values. India relies heavily on imports to meet its substantial annual demand, averaging around 800-900 tonnes, with minimal domestic production. In 2024 alone, India imported roughly $58.5 billion worth of gold, ranking it as the fifth-largest importer globally. The lack of openness in the current import system means prices aren't just driven by global benchmarks but also by the influence of these few dominant players, raising questions about fair trade in this significant sector. Even a 1kg gold bar is colloquially known as a 'Cadbury' in this insular market.

Smuggling and Duty Dodging

The scale of unofficial trade is substantial. Reports indicate gold smuggling has been rampant, with authorities struggling to contain it. In 2024, official gold imports surged, partly due to purchases by the Reserve Bank of India, which added 73 tonnes to its reserves. However, alongside increased official imports, efforts to curb illegal entry continue. Recent regulations in June 2025 restricted imports of certain precious metals and alloys to prevent gold entering disguised as other forms, thereby avoiding duties. These measures highlight ongoing challenges in controlling unofficial channels, with estimates suggesting over 50% of smuggling attempts may evade detection. Past attempts, like the 2013 gold import-export scheme, faced criticism for allegedly facilitating "round-tripping" of black money. The government has repeatedly adjusted import duties, most recently cutting them significantly in July 2024 from 15% to 6%, aiming to curb smuggling and align domestic prices with international levels. Despite these efforts, loopholes persist. For example, importing gold disguised as platinum alloy from the UAE under a trade agreement has cost the exchequer an estimated Rs 1,700 crore in lost revenue since 2022.

Lack of Exchanges and Loopholes

India's gold market suffers from opacity, partly due to a lack of formal trading exchanges like those in London or Shanghai. While proposals for gold exchanges exist to boost price transparency, the trade remains largely informal. Bullion dealers play a key role in setting prices, influenced by local dynamics, taxes, and regulations. Historically, cash transactions and splitting bills to bypass reporting rules have further entrenched this lack of openness. Sophisticated schemes, such as importing gold disguised as platinum alloy from the UAE under a trade agreement, demonstrate how importers exploit regulatory gaps to bypass high duties and restrictions, leading to significant revenue losses for the country. The government's attempts to control imports, through duty adjustments and specific category restrictions, show a continuous battle against illicit trade and tax evasion. The July 2024 duty reduction, for instance, aimed to make illegal imports less profitable – a strategy repeatedly used throughout India's history of managing gold imports.

The Road Ahead for Transparency

Looking forward, India's gold market faces ongoing scrutiny over its transparency and fair pricing. While recent duty cuts aim to bring prices closer to global benchmarks and reduce smuggling, the persistent reliance on informal channels and the emergence of new evasion tactics suggest continued challenges. The market's significant seasonal demand, especially during festivals and weddings, alongside investment interest, will keep driving import volumes. This necessitates robust regulatory oversight. Global uncertainties and central bank gold accumulation are expected to support demand, but the internal market structure will remain crucial for accurate price discovery and building investor confidence.