September 27, 2018 / 8:05 AM / 2 months ago

Indonesians snap up gold as local markets stumble

JAKARTA, Sept 27 (Reuters) - Indonesians smarting from a falling share market and a currency near 20-year lows are turning to gold as a safe haven, boosting sales of retail ingots and encouraging state miner Aneka Tambang to up production.

Financial markets in Southeast Asia’s largest economy have been battered by capital outflows, as a rallying U.S. dollar and global trade tensions spur some foreign investors to desert emerging markets.

Jakarta’s main stock index has dropped nearly 7 percent this year, bond yields have soared and the rupiah has fallen 9 percent to around its weakest since the 1998 Asian financial crisis.

Santika, a 30-year-old housewife in Jakarta said she invests in popular gold ingots, sold in sizes as small as a gram (0.04 oz), as well as saving some money in bank accounts.

“I prefer to buy more gold that I can hold in physical form. I’m afraid if the rupiah will continue to fall this year so I will keep on buying gold,” she said.

Gold is a go-to investment for many Indonesians given a history of steep fluctuations in the rupiah, said Aidil Akbar Madjid, head of financial planning firm Aidil Akbar Madjid and Associates.

While gold jewellery was held by the older generation, younger buyers are investing in small ingots mostly made by Aneka Tambang, or Antam, and sold in gold shops, pawn shops and increasingly online.

DEMAND JUMP

The latest figures from the World Gold Council show Indonesian demand hit a three-year high in the June quarter, rising 10 percent to 11.2 tonnes.

Antam chief executive Arie Prabowo Ariotedjo said the company’s domestic gold sales have been particularly strong in the third quarter, jumping to 2.2 tonnes in July and 2.6 tonnes in August, from 1.1 tonnes a month usually.

“It looks like the volatile market condition made people switch to gold,” Ariotedjo told Reuters.

To meet rising demand, Antam is planning to ramp up production to 26 tonnes this year from an initial target of 24 tonnes.

Local prices for the precious metal have risen about 9 percent in the past year to 669,000 rupiah ($44.87) per gram, despite a fall global gold prices.

By contrast, most mutual funds have posted a negative return so far this year, according to research firm Infovesta Utama.

Gold sales at state-owned pawnshop chain Pegadaian, the country’s biggest, soared in August to mid-September to about 25 kilograms (55 lbs), almost matching the total sales in January-July, said finance director Teguh Wahyono.

Online sales have also jumped, with marketplaces such as Bukalapak and Tokopedia offering interest-free instalments, trying to cater to younger investors.

Transactions were up about 30 percent from a year ago so far in the third quarter, said Indra Sjuriah, chief of marketing at gold shop IndoGold that partners with BukaLapak.

Investment adviser Madjid, however, noted that gold is generally more popular among investors with less financial experience and has advised his clients to steer clear.

“Gold prices have been quite stable since 2012, so you can’t use it for long term (investment). It’s more appropriate as an emergency fund for say one to three years,” he said.

$1 = 14,910 rupiah Additional reporting by Maikel Jefriando; Writing by Gayatri Suroyo; editing by Richard Pullin

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