Gold at record highs, crime at record levels: How soaring prices are fuelling a $48 billion illicit gold economy
Record gold prices are fuelling not just investor demand but also a booming illicit gold economy that finances organised crime, money laundering and armed groups. A new IISS report warns that illegal gold mining is emerging as a major threat to global security, supply chains and government revenues.
- Jul 19, 2026,
- Updated Jul 19, 2026 8:10 AM IST
Gold's rally to record highs has delighted investors seeking a safe-haven asset amid geopolitical uncertainty and economic volatility. But the surge in prices has also fuelled a darker global trend: a rapid expansion of the illicit gold economy that is enriching organised crime, financing armed groups, accelerating environmental destruction and depriving governments of billions in tax revenues.
A new report by the International Institute for Strategic Studies (IISS) warns that illegal gold mining and trafficking have evolved into a sophisticated transnational criminal enterprise spanning the Amazon basin, Southeast Asia and Sub-Saharan Africa. The report estimates that illicit gold mining generates between US$12 billion and US$48 billion annually, although the true figure could be even higher because of widespread under-reporting and informal trade.
Why is illicit gold booming?
The report attributes the expansion largely to soaring gold prices and strong global demand.
Gold prices climbed more than 182% over the past five years, crossing US$5,600 per ounce in early 2026 as investors and central banks increased purchases during a period marked by geopolitical conflicts, inflation concerns and weakening multilateral cooperation. While higher prices have benefited legitimate miners and investors, they have also dramatically increased the profitability of illegal mining operations.
Unlike many illicit commodities, gold possesses characteristics that make it particularly attractive to criminal networks. It is highly valuable, portable, easily concealed and can be smuggled across borders with relatively limited detection. Weak customs oversight and inadequate traceability systems also make it easier to disguise the origin of illegally mined gold before it enters formal supply chains.
How the illicit gold economy works
| Stage | What happens |
|---|---|
| Illegal mining | Gold is extracted from unregulated mines, often in remote forests or conflict zones. |
| Criminal control | Armed groups and organised crime control mining sites, labour and transport routes. |
| Money laundering | Gold is mixed with legally mined gold using forged documents and shell companies. |
| Export | Gold is shipped through transit hubs and free-trade zones to obscure its origin. |
| Legal market | Refined gold enters global jewellery, investment and industrial supply chains. |
A growing source of organised crime financing
According to the IISS, illicit gold is no longer simply an illegal mining problem. It has become a major revenue source for organised criminal groups and non-state armed organisations that use proceeds from gold mining and trafficking to finance their operations.
In Latin America, the report notes that illegal gold mining now rivals or even exceeds drug trafficking as a source of income for some criminal groups. In Peru, non-state armed groups reportedly generate three times more revenue from illicit gold than from narcotics, while in Colombia illegal gold has become more profitable than cocaine trafficking for several armed organisations. Across parts of the Sahel in Africa, jihadist groups, militias and armed factions are increasingly competing for control of gold-rich regions and trafficking routes.
MUST READ: Can fluctuating gold prices impact your home loan EMI? Here's the link to borrowing costs
Impact of the illicit gold trade
| Area | Impact |
|---|---|
| Security | Funds organised crime and armed groups |
| Economy | Tax revenue losses worth billions |
| Environment | Deforestation, mercury pollution and biodiversity loss |
| Society | Human trafficking, forced labour and displacement |
| Financial system | Enables money laundering and illicit financial flows |
Money laundering and supply chain risks
The report also highlights how illicit gold has become an effective vehicle for money laundering.
Criminal organisations increasingly channel proceeds from drug trafficking and other illegal activities into gold mining because the metal can later be sold through seemingly legitimate channels. False certificates of origin, shell companies, forged permits and free-trade zones are frequently used to integrate illegally sourced gold into global supply chains, making it difficult for refiners and buyers to identify the true source of the metal.
MUST READ: Gold rates in July: Five reasons yellow metal prices may remain under pressure through 2026
The report cites investigations in Indonesia into an alleged US$1.48 billion money-laundering scheme linked to illicit gold, while Peru has seen a proliferation of gold-exporting companies suspected of helping legitimise illegally mined gold.
Key numbers
| Indicator | Data |
|---|---|
| Estimated illicit gold economy | US$12-48 billion annually |
| Gold price increase (5 years) | 182% |
| Gold price (early 2026) | Above US$5,600/oz |
| ASGM share of global production | 20% |
| ASGM share of global mining workforce | 80% |
| Informal ASGM | Around 80% |
| Mercury emissions from ASGM | 37% of global total |
| Countries studied | 10 |
| Regions covered | Amazon, Southeast Asia, Sub-Saharan Africa |
Environmental and fiscal costs
Beyond crime, the illicit gold trade carries heavy environmental and economic consequences.
Illegal mining is associated with widespread deforestation, mercury contamination, biodiversity loss and pollution of rivers that support local communities. Artisanal and small-scale gold mining (ASGM) is estimated to account for 37% of global mercury emissions, despite international restrictions on the toxic metal.
Governments also lose substantial tax revenue because much of the trade occurs outside formal channels. The IISS estimates the illicit gold economy is worth up to US$48 billion annually, undermining public finances, weakening institutions and eroding confidence in legal mining sectors.
What needs to change?
The report argues that isolated enforcement measures are unlikely to succeed against increasingly sophisticated criminal networks. Instead, it calls for stronger international cooperation, tighter anti-money laundering frameworks, improved customs oversight, judicial reforms, better policing of mining regions and programmes that formalise artisanal mining while providing alternative livelihoods for local communities.
As gold continues to command record prices, the IISS warns that curbing the illicit gold economy will require governments, regulators and the private sector to strengthen oversight across the entire supply chain. Without coordinated action, the precious metal's growing value could continue to finance organised crime, fuel conflict and inflict lasting economic and environmental damage far beyond the mines where it is extracted.
MUST READ: Gold allocation explained: Here's how much of your ₹10 lakh or ₹50 lakh portfolio should be in gold
Gold's rally to record highs has delighted investors seeking a safe-haven asset amid geopolitical uncertainty and economic volatility. But the surge in prices has also fuelled a darker global trend: a rapid expansion of the illicit gold economy that is enriching organised crime, financing armed groups, accelerating environmental destruction and depriving governments of billions in tax revenues.
A new report by the International Institute for Strategic Studies (IISS) warns that illegal gold mining and trafficking have evolved into a sophisticated transnational criminal enterprise spanning the Amazon basin, Southeast Asia and Sub-Saharan Africa. The report estimates that illicit gold mining generates between US$12 billion and US$48 billion annually, although the true figure could be even higher because of widespread under-reporting and informal trade.
Why is illicit gold booming?
The report attributes the expansion largely to soaring gold prices and strong global demand.
Gold prices climbed more than 182% over the past five years, crossing US$5,600 per ounce in early 2026 as investors and central banks increased purchases during a period marked by geopolitical conflicts, inflation concerns and weakening multilateral cooperation. While higher prices have benefited legitimate miners and investors, they have also dramatically increased the profitability of illegal mining operations.
Unlike many illicit commodities, gold possesses characteristics that make it particularly attractive to criminal networks. It is highly valuable, portable, easily concealed and can be smuggled across borders with relatively limited detection. Weak customs oversight and inadequate traceability systems also make it easier to disguise the origin of illegally mined gold before it enters formal supply chains.
How the illicit gold economy works
| Stage | What happens |
|---|---|
| Illegal mining | Gold is extracted from unregulated mines, often in remote forests or conflict zones. |
| Criminal control | Armed groups and organised crime control mining sites, labour and transport routes. |
| Money laundering | Gold is mixed with legally mined gold using forged documents and shell companies. |
| Export | Gold is shipped through transit hubs and free-trade zones to obscure its origin. |
| Legal market | Refined gold enters global jewellery, investment and industrial supply chains. |
A growing source of organised crime financing
According to the IISS, illicit gold is no longer simply an illegal mining problem. It has become a major revenue source for organised criminal groups and non-state armed organisations that use proceeds from gold mining and trafficking to finance their operations.
In Latin America, the report notes that illegal gold mining now rivals or even exceeds drug trafficking as a source of income for some criminal groups. In Peru, non-state armed groups reportedly generate three times more revenue from illicit gold than from narcotics, while in Colombia illegal gold has become more profitable than cocaine trafficking for several armed organisations. Across parts of the Sahel in Africa, jihadist groups, militias and armed factions are increasingly competing for control of gold-rich regions and trafficking routes.
MUST READ: Can fluctuating gold prices impact your home loan EMI? Here's the link to borrowing costs
Impact of the illicit gold trade
| Area | Impact |
|---|---|
| Security | Funds organised crime and armed groups |
| Economy | Tax revenue losses worth billions |
| Environment | Deforestation, mercury pollution and biodiversity loss |
| Society | Human trafficking, forced labour and displacement |
| Financial system | Enables money laundering and illicit financial flows |
Money laundering and supply chain risks
The report also highlights how illicit gold has become an effective vehicle for money laundering.
Criminal organisations increasingly channel proceeds from drug trafficking and other illegal activities into gold mining because the metal can later be sold through seemingly legitimate channels. False certificates of origin, shell companies, forged permits and free-trade zones are frequently used to integrate illegally sourced gold into global supply chains, making it difficult for refiners and buyers to identify the true source of the metal.
MUST READ: Gold rates in July: Five reasons yellow metal prices may remain under pressure through 2026
The report cites investigations in Indonesia into an alleged US$1.48 billion money-laundering scheme linked to illicit gold, while Peru has seen a proliferation of gold-exporting companies suspected of helping legitimise illegally mined gold.
Key numbers
| Indicator | Data |
|---|---|
| Estimated illicit gold economy | US$12-48 billion annually |
| Gold price increase (5 years) | 182% |
| Gold price (early 2026) | Above US$5,600/oz |
| ASGM share of global production | 20% |
| ASGM share of global mining workforce | 80% |
| Informal ASGM | Around 80% |
| Mercury emissions from ASGM | 37% of global total |
| Countries studied | 10 |
| Regions covered | Amazon, Southeast Asia, Sub-Saharan Africa |
Environmental and fiscal costs
Beyond crime, the illicit gold trade carries heavy environmental and economic consequences.
Illegal mining is associated with widespread deforestation, mercury contamination, biodiversity loss and pollution of rivers that support local communities. Artisanal and small-scale gold mining (ASGM) is estimated to account for 37% of global mercury emissions, despite international restrictions on the toxic metal.
Governments also lose substantial tax revenue because much of the trade occurs outside formal channels. The IISS estimates the illicit gold economy is worth up to US$48 billion annually, undermining public finances, weakening institutions and eroding confidence in legal mining sectors.
What needs to change?
The report argues that isolated enforcement measures are unlikely to succeed against increasingly sophisticated criminal networks. Instead, it calls for stronger international cooperation, tighter anti-money laundering frameworks, improved customs oversight, judicial reforms, better policing of mining regions and programmes that formalise artisanal mining while providing alternative livelihoods for local communities.
As gold continues to command record prices, the IISS warns that curbing the illicit gold economy will require governments, regulators and the private sector to strengthen oversight across the entire supply chain. Without coordinated action, the precious metal's growing value could continue to finance organised crime, fuel conflict and inflict lasting economic and environmental damage far beyond the mines where it is extracted.
MUST READ: Gold allocation explained: Here's how much of your ₹10 lakh or ₹50 lakh portfolio should be in gold