Indonesia gold prices fall on rupiah appreciation

Retail gold prices in Indonesia fell sharply on 23 October 2025, signalling a recalibration in household asset preference and highlighting the interplay between currency strength, global commodity pricing, and local macro conditions. Pegadaian-listed one-gram 24K bars closed at IDR 2,541,000 per gram, a drop of nearly 15% from cyclical highs above IDR 3,000,000 recorded in May 2025. The rupiah (IDR=X) appreciated to 15,700 per USD in the same week, while global spot gold (XAUUSD) slipped to $2,085 per ounce. These developments collectively compressed the domestic gold premium and reduced hedging demand.

The primary catalyst for this gold price correction is the strengthening of the rupiah. As the IDR gained 1.5% against the US dollar over October, imported gold became less expensive, with the pass-through effect typically one-to-one in the absence of global price shocks. This currency appreciation was reinforced by continued capital inflows, with net portfolio investments in Indonesian equities and government bonds supporting the currency and reducing the incentive for households to hold gold as a defensive asset. Bank Indonesia maintained the policy rate at 6.25%, anchoring expectations and helping keep headline inflation at 2.6% year on year in September 2025. These macro anchors constrained upward pressure on local gold prices and encouraged asset rotation toward deposits and equities.

Retail gold in Indonesia traditionally serves as an inflation and currency hedge, especially when volatility in the rupiah or CPI expectations rise. However, the recent drop in gram prices has shifted household allocation away from bullion. Industry data for Q3 2025 show a 4% contraction in retail gold sales volumes, while flows into time deposits, unit-linked insurance, and listed equities expanded. For the financial sector, this adjustment supports domestic liquidity and lowers the risk of sudden bullion import surges that could widen the current account deficit. Indonesia posted a preliminary current account surplus of 1.1% of GDP in Q3 2025, helped by reduced gold import demand and strong non-oil-and-gas export receipts.

From a market structure perspective, the decline in local gold prices coincided with relatively stable Indonesian sovereign yields—10-year government bonds traded at 6.8% in October 2025. This stability, in combination with rupiah appreciation and subdued inflation, has compressed risk premia and sustained investor appetite for rupiah-denominated assets. For global investors, these signals were visible in the iShares MSCI Indonesia ETF (EIDO), which attracted net inflows during the month, and in the relative underperformance of the VanEck Gold Miners ETF (GDX), reflecting a rotation from defensive commodity hedges to productive domestic assets. These trends align Indonesia with other emerging markets experiencing similar shifts in the wake of currency stabilization and real yield resilience.

Looking ahead, risks remain quantifiable and time-bound. A reversal in the rupiah—if it depreciates past 16,200 per USD—or a sharp rally in global gold prices above $2,200 per ounce would likely reignite retail hedging demand and push gram prices back above IDR 2,750,000. Historical sensitivity analysis suggests a 1% IDR depreciation can result in a 0.8% increase in local gold prices within a week. On the upside, if the rupiah remains firm, CPI stays below 3%, and the current account maintains a surplus, gold demand is likely to stagnate or contract, freeing up domestic savings for capital market expansion and supporting local asset valuations.

For market participants, indicators to monitor through Q1 2026 include the 24K gram price (targeting below IDR 2,600,000), USD/IDR exchange (maintaining above 15,800), 10-year bond yields (anchored below 7%), and current account balances (surplus >1% of GDP). These markers will confirm whether Indonesia’s household asset allocation continues its pivot from gold to financial instruments.