- According to Listya Endang Artiani, a lecturer and researcher at the Islamic University of Indonesia (UII), the current trend of widespread gold purchases, despite escalating prices, should be interpreted as an unusual economic indicator.
- She views this phenomenon as a sign of growing distrust towards existing monetary and fiscal policies, and a growing public effort to protect value through the accumulation of gold.
The price of gold has experienced a significant increase in recent weeks, with the price per troy ounce reaching around US$3,350 at the beginning of April. Based on the rupiah to US dollar exchange rate of approximately Rp16,800, the price of gold is around Rp1.8 million per gram. Despite this, the trend of buying gold even when the price is soaring can be seen as a public effort to protect value, as gold is considered a safe haven asset or a savings instrument capable of preserving its value during systemic pressure on the financial market.
“It becomes an effective value protector during times of crisis or economic uncertainty,” said Listya in a written statement to Tempo.
- The accumulation of gold can pose a danger to the future economy, as it incurs an opportunity cost to finance the real sector.
- The massive shift towards alternative investment instruments, such as precious metals, can disrupt the intermediary function of financial institutions.
Recent data from Bank Indonesia (BI) indicates a slowdown in deposit growth during the first quarter of 2025 compared to the preceding period. This trend reflects a discernible shift in investors’ and the public’s preferences towards alternative investment instruments, such as precious metals, amidst global economic uncertainty and financial market volatility.
| Recommendations | Explanations |
|---|---|
| 1. Improvement of Monetary Policy Communication (Forward Guidance) | Bank Indonesia needs to optimize the utilization of policy communication instruments, such as forward guidance, to clearly articulate the anticipated trajectory of monetary policies and the measures being taken to address inflation and exchange rate stability. |
| 2. Diversification of Competitive and Inclusive Investment Instruments | The government needs to offer a more diverse and competitive array of investment instruments to the public, such as Retail Sukuk, Retail Government Bonds, and green bonds. |
| 3. Improvement of Financial Literacy and Investment Education | Education on smart and productive investments should be a priority for financial institutions and the government, to empower investors to make more rational investment decisions. |
| 4. Regulation and Monitoring of Non-Productive Assets | Regulations that promote the recording of gold ownership in the formal financial system will expand the country’s tax base and help the government make more accurate fiscal planning. |
| 5. Strengthening the Capital Market Ecosystem | The government and capital market authorities need to expedite the formation and development of a more inclusive stock market, where investors can access a variety of safe and profitable financial products. |
“For this reason, policies that prioritize financial literacy, market transparency, and investment diversification will be essential in guiding the public towards a more productive, sustainable, and stable economic direction,” Listya concluded. The decision to invest in gold must be considered within a broader context where other productive investment instruments can also significantly contribute to the nation’s economic growth. By prioritizing financial literacy, market transparency, and investment diversification, the government and central bank can restore public confidence in economic stability and guide the public towards a more productive, sustainable, and stable economic direction. “Policies that prioritize financial literacy, market transparency, and investment diversification will be essential in guiding the public towards a more productive, sustainable, and stable economic direction,” Listya stated. Source: Tempo, Jakarta
Why the Accumulation of Gold is a Cause for Concern
- The accumulation of gold can incur an opportunity cost to finance the real sector, which could pose a danger to the future economy.
- The massive shift towards alternative investment instruments, such as precious metals, can disrupt the intermediary function of financial institutions.
“This trend could disrupt the intermediary function of financial institutions, especially if driven by negative sentiment towards monetary policies,”
The decision to invest in gold must be considered within a broader context where other productive investment instruments can also significantly contribute to the nation’s economic growth.
Source: Tempo, Jakarta
Recommendations for Policy Makers
- 1. Improvement of Monetary Policy Communication (Forward Guidance)
- 2. Diversification of Competitive and Inclusive Investment Instruments
- 3. Improvement of Financial Literacy and Investment Education
- 4. Regulation and Monitoring of Non-Productive Assets
- 5.
