War Changes Everything: Gold Now a Symbol of National Sovereignty

Amid war, economic sanctions, and rising global geopolitical rivalry, gold is no longer seen merely as an investment asset or jewellery. For many countries, gold has transformed into an instrument of sovereignty that plays a vital role in maintaining economic stability and national resilience. The price of gold has soared sharply since the Russia-Ukraine war erupted on 24 February 2022. Since the conflict began, the gold price has surged 111% from US$1,903.144 per troy ounce to US$4,016 per troy ounce as of Friday (17/7/2026). The global gold price at closing even briefly touched the level of US$5,000 per troy ounce in February 2026. The intraday record high for the global gold price was US$5,594.82 per troy ounce at the end of January 2026. Beyond geopolitical uncertainty, one of the biggest drivers of the gold rally came from the freezing of more than US$300 billion of Russian foreign exchange reserves by Western countries as a consequence of the Ukraine war. This move led many central banks to question the safety of holding reserves in US dollars and euros. As a result, gold has returned to prominence. Since 2022, gold purchases by central banks have soared above 1,000 tonnes per year, nearly double the historical average. China, Poland, India, and Turkey have been the largest buyers. The European Central Bank has even cited the surge in demand from central banks following the Russia-Ukraine war as one of the main factors driving gold prices to record highs. The purchases are not solely to capitalise on rising prices, but rather a strategy to reduce dependence on the US dollar and strengthen national financial positions. Unlike currencies whose value is influenced by central bank and government policies, gold is a real asset that cannot be printed at will. This characteristic makes gold a protective asset when the world faces financial crises, military conflicts, or geopolitical turmoil. In an increasingly fragmented global landscape, gold is also seen as a shield against the risk of economic sanctions. Unlike dollar-denominated assets or bonds held abroad that can be frozen, physical gold under a country’s control remains a usable strategic reserve. It is no wonder many central banks are making gold a cornerstone of their foreign exchange reserves. A large gold reserve also serves as an indicator of a nation’s financial strength; the greater the gold holdings, the higher the level of investor confidence in the country’s economic and currency stability. Bank Indonesia (BI) is recorded as holding 87 tonnes of gold reserves, placing it 44th in the global ranking of central bank gold holdings. The United States ranks first with 8,153 tonnes. This figure is relatively small compared to Indonesia’s estimated gold resources of 3,600 tonnes, one of the largest in the world. BI’s gold reserves are equivalent to 8.80% of its total foreign exchange reserves, a figure considered modest. Some analysts suggest that a gold allocation of 10-15% of total reserves is a healthy level for a developing country. Data from the World Gold Council (WGC) shows BI purchased 87 tonnes of gold in 2025 and 1.6 tonnes so far this year. The 2025 purchase was the first since 2018. BI Senior Deputy Governor Destry Damayanti explained that the central bank must consider several factors when buying or selling its gold reserves. WGC data also indicates that Indonesia’s gold consumption, outside the central bank, has climbed over the past three years. Demand reached 64.05 tonnes in 2018 before dipping due to the pandemic, then rebounded to 48.18 tonnes in 2025. Interestingly, demand for gold jewellery has declined while investment demand in the form of bars and coins has soared, reaching 31.6 tonnes in 2025 compared to 16.6 tonnes for jewellery. A WGC survey revealed that while savings accounts remain the most common financial instrument, gold is the most popular investment asset in Indonesia, with 67% of respondents owning gold in various forms.