Remote hillsides in Indonesia are being stripped bare and villages are grappling with poisoned soil, all due to a growing illicit gold trade that investigators say is being driven in large part by Chinese syndicates.
A Washington Post exposé based on satellite imagery, trade data, public records and interviews across three continents, found that these operations, which are being bankrolled by private Chinese investors, are far beyond the reach of local authorities, often running without interference from local police.
In Indonesia’s Lantung region, gold trader Heru Hairuddin expressed concern, telling the news outlet, “We don’t know where they take it. We only know it doesn’t stay here.”
Villagers say cyanide runoff from nearby pits has killed crops and cattle. Locals who mine with hand tools are dwarfed by the scale of Chinese-operated sites, where zinc-roofed dormitories house workers guarding the perimeter.
Protests, residents say, have been ignored.
While Indonesian authorities have stepped up enforcement by creating a special law enforcement arm in the minerals ministry and cracking down on cyanide smuggling rings, prosecutions remain rare and bribery has hampered cases.
In one instance, a large Chinese-run mine in Kalimantan employing 80 workers led to trials, but all of the defendants were acquitted in a decision later linked to judicial misconduct.
The investigation further revealed that shadow networks span from Southeast Asia to South America and across Africa. Operators are stepping into artisanal and small-scale gold mining (ASGM) with industrial equipment, advanced geological data and cash, and in many cases, they are extracting gold without permits and ignoring environmental rules.
Experts say the surge in illicit gold mining is linked to China’s long-term strategy to reduce reliance on the US dollar, shield itself from possible sanctions and secure commodities it views as strategically vital.
A growing criminal nexus
The United Nations Office on Drugs and Crime warned in May that organized crime is embedding itself so deeply in gold supply chains that the trade now poses a “serious global threat.” Criminal groups, including drug cartels, terrorist networks and mercenary outfits, are increasingly getting involved, often in partnership with Chinese-linked operators that have the resources and connections to penetrate previously untapped deposits.
Unlike traditional artisanal miners, the Post indicates that these syndicates operate at near-industrial scale, but without environmental or safety safeguards. In many regions, they are shifting from mercury to cyanide in gold processing, a more efficient method, but one that is even more hazardous to surrounding communities if left unchecked.
China has been among the world’s top gold buyers for over a decade, but analysts speculate that the true size of its reserves remains a mystery and may be far higher than reported publicly.
Jan Nieuwenhuijs, a gold analyst at Money Metals, estimates that in 2024 alone, the Chinese central bank covertly purchased 570 metric tons— more than double its declared figure. The scale of buying, Nieuwenhuijs told the Post, is changing the gold market because Beijing sees the metal as an “alternative to the dollar.”
While Chinese officials insist their gold import and export data is “open and transparent,” researchers warn that secrecy surrounding state holdings makes it easier for illicitly mined gold to enter the system undetected.
Globally, the illicit gold sector is valued at more than US$30 billion a year, according to conservative estimates. A 2024 study by nonprofit Swissaid found gold smuggling out of Africa doubled between 2012 and 2022.
Once refined, illegal gold is virtually indistinguishable from legally mined metal, making it attractive to major buyers.
A global pattern and calls for coordinated action
As mentioned, the same dynamics are playing out far from Indonesia.
In Brazil, President Luiz Inácio Lula da Silva has made eliminating illegal mining from Indigenous lands a central pledge since returning to office in 2023. Raids by environmental agency Ibama have targeted the Yanomami and Munduruku territories, where mining has caused severe deforestation, mercury contamination and health crises.
New regulations now require electronic invoices for gold trades in an attempt to reduce laundering of illegal metal.
Yet, the profits remain irresistible. The World Gold Council estimates that ASGM now accounts for about 20 percent of global gold production, up from around 4 percent in the 1990s, when prices were near US$250 an ounce. The gold price has risen as high as US$3,500 this year, and is currently priced at the US$3,350 level.
Dominic Raab, former UK deputy prime minister and now head of global affairs for Appian Capital Advisory, told S&P Global that a high gold price is tempting for illegal operators. “If the price goes up … criminal organizations have looked at diversifying into gold. It’s easy to melt down. It’s easy to smuggle. It’s pretty tough to track,” he said.
In November 2024, Raab partnered with the World Gold Council to publish “The Silence is Golden,” a report on how criminal gangs, armed groups and corrupt officials exploit ASGM to fund wars, terrorism, and organized crime.
The report identifies three fundamental challenges: lack of transparency in business and government compliance with legal standards; failures of accountability; and disjointed enforcement across jurisdictions.
It then outlines 24 practical actions for governments, international organizations, NGOs and the mining sector, ranging from prosecuting offenders to sustaining a coordinated G7 and G20 response.
However, not all ASGM is illegal, as some miners are seeking to adopt safer, mercury-free techniques.
As gold prices remain high, demand from buyers like China will keep fueling the trade.
The challenge, according to market participants, is to channel ASGM into regulated, sustainable frameworks before criminal networks entrench themselves further.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
