War Changes Everything: Gold Now a Symbol of National Sovereignty
Jakarta, CNBC Indonesia – Amid war, economic sanctions and rising global geopolitical rivalry, gold is no longer viewed merely as an investment asset or jewellery.
For many countries, gold has transformed into an instrument of sovereignty that plays an important role in maintaining economic stability and national resilience.
Gold prices have surged sharply since the Russia-Ukraine war erupted on 24 February 2022. Since the outbreak of the war, the price of gold has rocketed 111%, from US$1,903.144 per troy ounce to US$4,016 per troy ounce as of Friday (17/7/2026).
At its peak, the global gold price even touched US$5,000 per troy ounce in February 2026.
The intraday record for the global gold price stands at US$5,594.82 per troy ounce, set in late 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 Russia’s foreign exchange reserves by Western nations as a consequence of the Ukraine war.
That move led many central banks to begin questioning the safety of holding reserves in US dollars and euros.
As a result, gold has returned to prime favour.
Since 2022, central bank gold purchases have surged above 1,000 tonnes per year, nearly double the historical average.
China, Poland, India and Turkey have been the biggest buyers. The European Central Bank has even described the post-war surge in central bank gold demand as one of the key factors driving record after record in gold prices.
Gold purchases are not merely about capitalising on ever-rising prices, but rather a strategy to reduce dependence on the US dollar and strengthen national financial positions.
Unlike currencies, whose values are influenced by central bank and government policy, gold is a real asset that cannot simply be printed. It is this characteristic that makes gold a defensive asset when the world faces financial crises, military conflict 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 debt securities held abroad that could potentially be frozen, physical gold under a state’s control can still be used as a strategic reserve. It is no surprise that many central banks regard gold as one of the main foundations of their foreign exchange reserves.
Large gold reserves also serve as an indicator of a country’s financial strength.
The greater a country’s gold holdings, the higher investor confidence in that country’s economic and currency stability.
How Large Are Bank Indonesia’s Gold Reserves?
Indonesia’s central bank, Bank Indonesia (BI), holds gold reserves of 87 tonnes.
With that amount, BI ranks 44th among countries and institutions holding the world’s largest gold reserves. The top position is occupied by the United States with 8,153 tonnes.
BI’s gold reserves are small compared with Indonesia’s estimated gold deposits of 3,600 tonnes, one of the largest in the world.
BI’s gold reserves are equivalent to 8.80% of total foreign exchange reserves, a relatively small figure.
Some analysts consider a gold allocation of 10-15% of total foreign exchange reserves to be a healthy level for developing countries.
With holdings of around 87 tonnes, Indonesia’s gold reserves are also still low compared with the country’s potential gold resources of approximately 3,600 tonnes.
Those deposits remain underground and have not yet fully become part of the nation’s official reserves.
World Gold Council (WGC) data shows BI bought 87 tonnes of gold in 2025 and 1.6 tonnes so far this year.
The 2025 purchase was the first since 2018, or in seven years.
BI Senior Deputy Governor Destry Damayanti explained that the bank must consider a number of factors when buying or selling its gold reserves.
“There have been purchases, but indeed not many. There are specific standards that must be met (if we want to add to gold reserves),” BI Senior Deputy Governor Destry Damayanti told CNBC Indonesia.
Based on BI’s current gold reserves of just 87 tonnes, or 8.8% of total reserves, an additional 87 tonnes would be needed if BI wanted to double its holdings to 174 tonnes.
Indonesia’s Gold Consumption
World Gold Council (WGC) data shows that Indonesia’s gold consumption, excluding the central bank, has climbed over the past three years.
Gold consumption or demand reached 64.05 tonnes in 2018 before slowing due to the pandemic, but rebounded to 48.18 tonnes in 2025.
WGC data also paints an interesting picture of gold demand in Indonesia. Demand for gold jewellery has continued to decline, while demand for investment purposes has surged.
Jewellery demand in 2025 reached 16.6 tonnes, while investment demand in the form of bars and coins hit 31.6 tonnes.
Over the past five years, jewellery demand has fallen 20.5%, while investment demand has soared 88.4%.
In 2025, the WGC conducted a survey of Indonesian consumers on investment perceptions.
The survey revealed that savings accounts remain the financial instrument most widely held by the public. Some 74% of respondents said they held savings accounts as their primary means of storing funds.
However, after savings, gold emerged as the most popular investment instrument in Indonesia.
Some 67% of respondents, or roughly two out of three Indonesian investors, said they owned gold in various forms, from high-purity jewellery to gold bars and coins.
Given the scale of domestic demand for gold and the strategic importance of gold reserves, the supply of refined bullion has become increasingly crucial to expand. Moreover, Indonesia’s large gold deposits also imply a large capacity for domestic bullion production.
US Geological Survey (USGS) data records Indonesia’s gold production at 90 tonnes. However, this does not automatically mean Indonesia produced 90 tonnes of sale-ready bullion.
Under its methodology, the USGS measures production based on the pure gold content generated by mining activity.
As such, the figure covers all forms of mine output containing gold, from dore bullion (a gold and silver mixture), gold-bearing concentrate, gold ore, processed deposits, through to refined gold bars.
Meanwhile, domestic demand in the form of bullion stands at 48-50 tonnes.
One of the companies with the highest bullion production capacity is PT Aneka Tambang (Persero) Tbk. Antam’s gold sales reach 37-43 tonnes per year, with part of its raw material sourced from the underground mine at Pongkor in West Java.
Antam operates a bullion refining facility in Pulogadung, Jakarta, with a production capacity of 40 tonnes per year. The entire process, including the casting of gold bars, is carried out at this site.
To strengthen national gold supply, MIND ID is building an integrated gold ecosystem spanning upstream to downstream.
The transformation of the national gold industry has now entered a new chapter. A major step began when MIND ID, together with PT Freeport Indonesia, built the Precious Metal Refinery (PMR) in Gresik, a precious metal refining facility that processes anode slime.
After Freeport’s ore is processed into copper concentrate, the material is smelted to produce copper anodes. The anodes are then refined through electrolysis to produce copper cathodes, while precious metals such as gold and silver settle as anode slime.
The anode slime is then processed to separate gold and other precious metals, which are refined to 99.99% purity into gold bars. That gold is then supplied to PT Aneka Tambang Tbk to be cast and marketed as ANTAM Logam Mulia products.
However, MIND ID’s moves did not stop with the construction of the PMR. The mining holding company is now continuing downstream development by building Antam’s bullion production facility in Gresik.
This facility will be directly integrated with the Freeport PMR, meaning refined gold will no longer need to be sent elsewhere for processing into final products. The integration is expected to shorten the supply chain, improve efficiency and increase the value added captured domestically.
Once the project is fully operational, Indonesia’s bullion production capacity will rise significantly.
Antam’s new Gresik plant is targeted to have a production capacity of around 30 tonnes of bullion per year, strengthening Indonesia’s position as one of the region’s largest producers of processed gold while reducing dependence on processing facilities abroad.
With the existing production capacity of 40 tonnes at the Pulogadung facility plus an additional 30 tonnes from the new Gresik facility under construction, the company’s total production capacity will rise to 70 tonnes once the new facility begins operations.
Bullion Bank and Efforts to Build a Stronger Gold Ecosystem
On the downstream side, the government is completing the gold supply chain and ecosystem through the presence of bullion banks operated by PT Pegadaian and PT Bank Syariah Indonesia Tbk (BSI). Both may carry out four main activities: gold savings, gold financing, gold trading and gold custody services.
The bullion bank is not a new concept globally. In Indonesia, official bullion business activities have been under way since 26 February 2025.
The government is targeting the bullion ecosystem as an engine for gold downstream development while deepening the financial market. Integration runs from the upstream side through increased refinery and production capacity, to the downstream side through gold savings, financing, trading and custody services.
The presence of bullion banks is expected not only to widen public access to gold investment but also to build a more integrated national gold ecosystem.
Under this scheme, gold from Freeport is processed into bullion by Antam, then enters the financial system through Pegadaian and BSI, before finally being utilised by the public and businesses.
This ecosystem is expected to deepen the national gold market, reduce dependence on imported raw materials and maximise domestic value added from gold.
Through this mechanism, domestically mined gold can be stored, traded and used as a financing instrument within the country.
“The bullion business must be optimised so that it delivers a tangible contribution to the national economy,” said Coordinating Minister for Economic Affairs Airlangga Hartarto at an event marking one year of bullion business implementation in Jakarta on Friday (6/3/2026).
One year after its launch, as of February 2026, the industry’s performance has shown strong growth.
Pegadaian’s customer numbers leapt from 3.2 million to 5.6 million within a year. Public gold savings nearly doubled, from 10.5 tonnes to 19.25 tonnes. Pegadaian’s total gold business holdings now stand at 147.8 tonnes, including 40.59 tonnes of bullion assets worth approximately Rp102 trillion.
Bank Syariah Indonesia (BSI) also recorded growth. Total gold under management rose from 16.85 tonnes to 22.5 tonnes, while gold savings customers increased from 531,000 to more than 766,000.
A Stronger Gold Ecosystem, Bigger Gold Reserves?
The bullion business, or Indonesian Gold Bank, forms a new foundation for building an integrated national gold ecosystem, from mining and refining to gold-based financial services.
An integrated gold ecosystem, from mines and refining to bullion banks, will expand the supply of internationally standardised bullion in the domestic market. However, abundant supply alone is not enough.
The success of this ecosystem will ultimately be determined by sustained demand. Bank Indonesia can be one of its driving engines by adding to its gold reserves, particularly given that gold’s share of Indonesia’s foreign exchange reserves remains relatively low.
As an illustration, if BI wished to raise its gold reserves to the level typical of developing countries (10-15%), it would need an additional 87 tonnes.
If the gold price reaches US$4,000 per troy ounce, then 87 tonnes of gold would be worth an estimated US$11.19 billion, or around Rp199.2 trillion (US$1 = Rp17,800).
This calculation is based on the conversion of 1 metric tonne equal to 32,150.75 troy ounces, meaning 87 tonnes is equivalent to around 2.80 million troy ounces.
Larger gold reserves would strengthen the quality of foreign exchange assets while reducing dependence on US dollar-denominated assets. Such diversification is important to improve the resilience of foreign exchange reserves and strengthen the rupiah amid global financial market turbulence.
Moreover, if the gold absorbed comes from domestic production, every BI purchase would not only strengthen the central bank’s balance sheet but also stimulate the mining sector, increase domestic value added and support national economic growth.
On the other hand, rising gold production would also strengthen supply for the processing industry and the domestic retail market. Dependence on gold imports could decline, reducing the foreign exchange needed to bring in gold from abroad. As a result, pressure on the rupiah could ease, while Indonesia’s economic resilience to external shocks and global uncertainty grows ever stronger.