Smuggled gold is income being generated that isn't being taxed, that is also in turn cutting into the profits of the legitimate gold trade for that country.
So the government is losing tax income and apparent GDP. This devalues the strength of the currency because the government that backs it is losing value via the aforementioned.
D_DnD t1_iy29rzn wrote
Reply to How could smuggling gold into a country with a struggling currency negatively impact its economy? by JovialNarcissist
Smuggled gold is income being generated that isn't being taxed, that is also in turn cutting into the profits of the legitimate gold trade for that country.
So the government is losing tax income and apparent GDP. This devalues the strength of the currency because the government that backs it is losing value via the aforementioned.