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Global central banks are now trading gold at a rate never seen before in history, as illegal exports strip billions from national revenues and weaken foreign exchange reserves, according to reporting by the Financial Times.
The problem comes mainly from Madagascar, an island where central bank governor Aivo Andrianarivelo said produces up to 20 tonnes of gold each year, worth literally $2.8 billion at current prices, yet almost none of it appears in official trade records.
Madagascar targets gold smuggling networks draining state revenues
Aivo said criminal groups involved in the gold trade operate with aircraft, helicopters, and advanced transport systems that allow metal to leave the country undetected. “The criminal gangs, they have aircraft, helicopters, very sophisticated means of transportation,” he said. “Our strategy is to reduce the gold trafficking business in Madagascar.”
As Cryptopolitan extensively reported throughout 2025, gold rallied by more than 60 percent and crossed $4,300 per troy ounce, becoming one of the top 5 most-traded assets globally. In countries where mining happens outside formal systems, authorities link the trade to environmental destruction, polluted rivers, human trafficking, and funding for armed groups.
Madagascar now joins a growing list of countries where central banks and finance ministries are running domestic buying programs to get back control of the market. According to Aico, they’re trying to pull small-scale miners into regulated markets by offering official purchase channels instead of leaving them dependent on smugglers.
Buying programs spread as prices fuel illegal gold mining
Countries including Ecuador, the Philippines, and Ghana are expanding similar schemes. David Tait, chief executive of the World Gold Council, said artisanal and small-scale miners produce up to 1,000 tonnes each year, with large volumes entering illegal trade. “It’s anybody’s guess how much gold goes to bad actors, but even if you take a guess at 50 percent, it is an enormous amount of money,” David said.
Rising prices also increase criminal income and environmental damage. “It could be apocalyptic, it really could, a law of unintended consequences of a rally to $10,000,” David said.
In Ghana, the government launched a centralized buying body called GoldBod in 2025 as mercury use and water pollution from mining turned into a political crisis. Officials say more than 60 percent of the country’s waterways are now contaminated due to mining tied to gold.
In Ecuador, where drug gangs have shifted into mining for cash, the government is expanding a buying program launched in 2016. A new buying station is set to open in Zamora in January. Diego Patricio Tapia Encalada, head of investments and international settlements at the Central Bank of Ecuador, said fast payments attract miners. “The price is important because then we incentivise the miner not to go to other channels,” Diego said, adding that payments are made within 48 hours.
For Madagascar, higher prices increase pressure to control a sector long beyond state reach. “One of the objectives is to make gold benefit Madagascar, and to legitimise the business,” Aivo said. “That is the main goal, to make it more transparent.” The central bank plans to raise reserves from one tonne to four tonnes, a target unchanged after a new government took power in October.
The bank buys output from artisanal miners and ships it overseas for refining. The metal can then be sold for foreign currency or added to reserves. The potential impact is large. Despite widespread production, gold does not appear among Madagascar’s top recorded exports, which include vanilla, cloves, clothing, and nickel.
Not all programs succeed. Marc Ummel, head of raw materials at SwissAid, said weak traceability has caused failures. “Most of them do not have good due diligence mechanisms,” Marc said, pointing to cases in Sudan and Ethiopia, where central banks bought illegally mined supply from the Tigray region.
There are working models. In Mongolia, a buying program running for over 30 years helped eliminate mercury use because stations test for contamination. Enkhjin Atarbaatar, director general of financial markets at the Bank of Mongolia, said artisanal mining was widespread in the 1990s, but most production now comes from small or mid-sized firms. Selling gold remains a key source of foreign currency.
As prices stay high, regulation grows harder. Diane Culillas, chief executive of Swiss Better Gold, said all output reaches markets regardless of legality. “The gold always finds its way to market,” she said. New tracing tools may help. Ecuador is testing isotope scanners to identify ore origins. “If you do this now, in 10 years there’ll be only tiny amounts of gold going in the bad guys’ directions,” David said.
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