At the helm of gold production is China, followed by Australia, Russia and the United States. These top producers should not come as a surprise since they have large land masses and are more likely to contain a variety of natural resources. Other gold mining countries include South Africa, Peru, Brazil, and Uzbekistan.
Over time, production in some areas has grown while others have contracted. These shifts stem from regulations on mining, introduction of new technology or depletion of resources, among others. Regardless of the country or the timing, black market gold mining exists and it has some interesting effects on gold production and global trade.
Gold Market Regulations
Regulations on gold trade, taxation, imports, exports and production vary from country to country and across various trade agreements. Public policy ranges from collecting taxes to fund government operations to restricting mining practices in the name of human rights and environmental protection.
An example of how market regulation can fuel the informal market can be seen in taxation. In smaller countries, tax revenue from gold mining has a significant impact on government funding, giving gold mines favorability in the political sphere in those regions. It also means that illegal gold mining hurts that funding since it goes untaxed on the black market.
Why and How the Black Market Exists
There is no one reason why the black market for gold exists, but there are several influencing factors. The informal (or “Black”) market crops up all over the globe, but is most overt in developing countries. As taxes are imposed more and more, miners turn to off-record mines, and selling to smugglers and illegal agents, in order to pocket more profit.
The important piece to note here is that while the buyers of this black market gold might be saving on taxes and export fees, they’re accepting risk elsewhere. Instead of up front financial risk, these market players are accepting the risk of criminal prosecution and steep costs in the future.
Furthermore, places like Hong Kong allow for tax-free import of undocumented gold. This provides an incredibly easy market to penetrate with black market gold. Once there, the material can move about more freely and even end up in finished goods.
The pushes and pulls of the international gold market create a playground for both legitimate and illegitimate trade. Commodity futures that are secured by legitimate gold producers and traders give investors real and accurately priced exposure to the gold market.
Avoiding Investing Mistakes in the Gold Black Market
The number one rule to live by is to only perform gold trades with reputable dealers and online platforms. If a deal seems too good to be true or if an unsolicited email regarding inexpensive gold comes your way, it probably means it is illegally collected goods. Do not take on the added risk just to save a few dollars. Illegal gold products can muddy the integrity of your overall investment portfolio and should be avoided.
When it comes to overall trading and investing, keep in mind that gold historically acts oppositely to interest rates and general economic forecast. As interest rates rise, the demand for gold declines. This is because higher interest rates mean that you and other investors can gain profit from different financial investments. Regardless, gold is a great long-term, reliable investment and can be a fantastic, secure baseline for any investment strategy.
How to Trade Gold Online
The Price of gold is constantly on the move. Take advantage of the daily price changes in gold with an online trading account. Some brokers offer bonuses of up to 30% on your first deposit (Terms and conditions apply). Open Gold Trading Account Here
The broker trading platform will also provide you with numerous charting tools and the ability to trade other commodities and currencies in addition to gold CFD’s. You might also want to begin trading with a demo account before attempting to risk any of your own money. That way you can practice trading with virtual money on the demo platform first.