The recent surge in gold prices could be a boon for Indonesia, despite the economic risks that loom behind the spike in demand for the safe haven commodity.
The price of bullion touched its highest level ever on Tuesday, with investors rushing to park their money in safe-haven assets, as concerns grow about a second wave of the coronavirus pandemic and its impact on the global economy.
Gold futures have soared nearly 30 percent this year to US$1,941 per ounce, beating the previous record of $1,921 in 2011, with the bullish rally kicking off earlier this month, Reuters data show. Several analysts project the price of bullion to top $2,100 this year because of the continued uncertainty around the pandemic.
Gold is a popular safe-haven asset for investors who want to hedge their funds against falling currencies and instability in financial markets, said Bank Central Asia (BCA) economist David Sumual, adding that its price usually increased when economic uncertainty was on the rise.
“Uncertainty around a second wave of the outbreak has seen gold prices go through the roof and this will benefit Indonesia,” David told The Jakarta Post during a phone interview on Tuesday. “As gold exporters, Indonesian gold miners will benefit significantly from the higher demand and price.”
Indonesia exported $4.36 billion in precious metals, gems and jewelry during this year’s first six months, a 36.3 percent increase year-on-year (yoy), while total exports during the same period fell 5.5 percent yoy, Statistics Indonesia (BPS) data show.
The COVID-19 pandemic has devastated the global economy this year, with the International Monetary Fund (IMF) expecting a 4.9 percent contraction in the world economy before rebounding to 5.4 percent growth next year. IMF projects Indonesia’s economy to shrink 0.3 percent this year.
According to official records, the virus has infected more than 16 million individuals across the globe, including more than 100,000 in Indonesia. Several countries, including China and Hong Kong, have decided to tighten health protocols amid rising case numbers after reopening their economies.
“The positive sentiment for gold is driven by the public’s demand for safe-haven assets during the COVID-19 pandemic,” state-owned metal miner PT Aneka Tambang (Antam) senior vice president corporate secretary Kunto Hendraprawoko told the Post.
“We will continue to make innovations to meet rising market demand,” he added, explaining that the company had seen a “significant surge” in online sales of the precious metal in the second quarter as the economy tumbled.
The price of gold sold by Antam jumped 2.5 percent to Rp 1.02 million ($70.1) per gram on Tuesday from a day earlier. The stocks of the company, traded on the Indonesia Stock Exchange (IDX) under the code…