A Strategic Shift in Commodity Management
Indonesia is taking a decisive step to reshape its economic landscape by elevating gold to the same level of importance as palm oil and nickel. The Southeast Asian nation recently launched its first bullion banks, a move designed to integrate the precious metal fully into the domestic financial system. This initiative aims to transform Indonesia from a raw material exporter into a central hub for gold processing, trading, and storage, capitalizing on record-high global gold prices and newly acquired domestic refining capabilities.
The government has designated state-owned entities PT Pegadaian and Bank Syariah Indonesia (BSI) as the official providers of bullion services. These institutions will oversee a comprehensive ecosystem that includes gold deposits, trading, financing, and custody. By keeping the entire gold supply chain within its borders, Indonesia hopes to reduce its reliance on imported fine gold and maximize the economic value of its vast natural resources.
Damar Latri Setiawan, president director of Pegadaian, emphasized the strategic importance of this development. He stated that the presence of gold banks allows Indonesia to build an integrated ecosystem where management, storage, financing, and trading occur entirely within the country. This shift addresses a long-standing anomaly where a nation with significant gold reserves was still dependent on imports for refined gold.
Leveraging Record Prices and Domestic Refining
The timing of this initiative coincides with a favorable market environment. Global gold prices have repeatedly hit record highs in 2025, approaching the $3,000 per ounce mark. Concurrently, Indonesia has achieved a technological milestone by acquiring the ability to produce fine gold domestically. Freeport Indonesia, operating one of the world’s largest gold mines at Grasberg, has successfully processed raw ore into 99.99 percent pure gold bars.
Just weeks before the bullion banks were launched, Freeport Indonesia delivered its first batch of domestically produced fine gold, weighing 125 kilograms, to state-owned miner PT Aneka Tambang (Antam). This delivery marked a significant achievement in Indonesia’s downstream mining ambitions. Freeport Indonesia has processed approximately 12.56 tons of anode slime at its PT Smelting subsidiary, resulting in 189 kilograms of gold bars.
Tony Wenas, chief executive of Freeport Indonesia, highlighted the purity of the product and the scale of the operation. To secure the supply chain, Freeport and Antam signed a five-year sale and purchase agreement covering 30 tons of gold, valued at an estimated $12.5 billion. This agreement ensures a steady flow of domestically refined gold into the new financial ecosystem.
Domestic gold prices have mirrored the global surge, with Antam gold bars climbing by approximately Rp 1 million ($60) per gram throughout 2025. Prices rose from Rp 1.52 million per gram on January 2 to Rp 2.50 million by December 31, creating a robust environment for investment and trading.
Monetizing Dormant Wealth
One of the primary drivers behind the establishment of bullion banks is the vast amount of gold held privately by Indonesian citizens. Estimates suggest that households across the archipelago hold roughly 1,800 tons of gold, much of it stored in non-institutional settings such as homes or private safes. Minister of State-Owned Enterprises Erick Thohir noted that these reserves were previously only recorded as tonnage and were not included in any bank’s financial balance sheet.
“In other words, they have not been monetized,” Thohir said.
This massive cache of private wealth represents a significant untapped economic potential. By encouraging citizens to deposit their gold into the formal banking system, the government aims to convert these static assets into dynamic financial instruments. This monetization process is expected to bolster the nation’s foreign exchange reserves and provide a buffer for currency stability.
The initiative also addresses the issue of gold outflow. Previously, a significant portion of gold mined in Indonesia was exported or held overseas due to a lack of domestic storage and financial infrastructure. President Prabowo Subianto highlighted this issue at the launch of the bullion banks, stating that Indonesia is a rich country that has only just realized its wealth. He noted that national gold production has risen from 100 metric tons to 160 tons annually, necessitating an improved ecosystem to retain this value.
Services Offered by the New Bullion Banks
The newly licensed institutions, Pegadaian and BSI, offer distinct but complementary services to capture different segments of the market. Pegadaian, a state-owned pawnshop firm, has expanded its focus from retail investment to a full suite of bullion services. Its offerings include gold deposits, gold-backed working capital loans, physical gold trading, and custodial services for both retail and corporate clients. As of late November 2025, Pegadaian’s gold assets under management had surged to 132.3 tons.
Bank Syariah Indonesia, the country’s largest Islamic bank, tailors its bullion services toward religious and ethical finance. BSI focuses on products such as gold savings accounts specifically designed for Hajj and Umrah expenses, allowing customers to save for religious pilgrimages using a stable, asset-backed currency. This approach aligns with Sharia principles and appeals to the country’s large Muslim population.
Under the new regulations, financial firms wishing to operate as bullion banks must hold a minimum capital of 14 trillion rupiah, approximately $850 million. This high entry barrier ensures that only financially robust institutions can manage these precious assets, providing security and confidence to depositors.
Economic Projections and Job Creation
The Indonesian government has outlined ambitious economic goals for the bullion banking sector. President Prabowo Subianto announced that bullion services could add Rp 245 trillion ($14.7 billion) to the gross domestic product and create 1.8 million new jobs. While specific job creation figures vary among estimates, with some studies projecting 800,000 jobs, the consensus is that the sector will be a significant employment driver.
Minister Erick Thohir echoed these optimistic projections, suggesting that the initiative could drive economic growth to 8 percent. He explained that the benefits extend beyond direct employment in banking. The government stands to save on foreign exchange reserves, the jewelry industry gains access to competitively priced raw materials, and mining companies can secure project financing or engage in forward hedge contracts directly with local banks.
Furthermore, the establishment of bullion banks is expected to reduce the country’s reliance on gold imports. By processing ore domestically and managing the refined product within national borders, Indonesia can save approximately Rp 200 trillion in foreign exchange previously spent on importing raw materials for gold bars.
Challenges and Expert Perspectives
While the government’s vision is bold, economists caution that the introduction of bullion banking may not yield an immediate boost to real economic activity. Wisnu Nugroho, an economist at Gadjah Mada University (UGM), noted that bullion banks are theoretically more closely linked to financial deepening than to directly driving real economic growth. He pointed out that while Indonesia’s gold reserves of about 3,600 metric tons exceed those of China and reported US holdings, its annual production of around 100 metric tons is well below major producers like Australia and Canada.
Wisnu argued that countries with large gold reserves are strong not simply because of the metal, but because they have diversified economies and strong financial institutions. The gap between Indonesia’s modest production and large reserves underscores gold’s role as a strategic financial asset rather than an industrial input. While reserves can provide a buffer for currency stability, they require efficient financial systems to translate that stability into broader economic growth.
Fellow UGM economist Diny Ghuzini emphasized the need for deeper connections between the financial sector and the real economy. She stated that to drive economic growth, there must be channels that connect the real sector with the financial sector. Potential sources of growth include trading, refining, logistics, leasing, and precious-metals financing.
Building Trust and Infrastructure
A critical challenge for the new bullion banks will be overcoming cultural preferences for physical possession of gold. In Indonesia, gold is deeply intertwined with cultural traditions, viewed as a secure store of wealth and often passed down through generations. Convincing citizens to move their gold from home safes to bank vaults requires building significant trust in the financial system.
Similar efforts in countries like Turkey and India have seen mixed results, as many citizens preferred to keep their gold at home rather than deposit it in banks. To address this, Indonesia is incorporating advanced technological solutions such as blockchain-enabled tracking and digital certification systems to enhance security and transparency. Additionally, public education campaigns will be essential to inform citizens about the benefits of formal gold banking, including competitive interest rates on gold deposits and the security of institutional storage.
Regulatory Framework and Future Expansion
The legal foundation for bullion banking in Indonesia is established in Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK). This law mandates financial reform and identifies the establishment of gold banks as a key mechanism for strengthening the financial sector. The Financial Services Authority (OJK) further refined the framework with Regulation Number 17 of 2024, which governs bullion business activities including deposits, financing, trading, and custody.
The regulatory framework emphasizes prudence, capital requirements, risk management, and transparency. It also mandates strict anti-money laundering programs, consumer protection measures, and robust reporting systems. These regulations are designed to ensure that the sector develops safely and sustainably, protecting both the integrity of the financial system and the interests of consumers.
Looking ahead, there is potential for the expansion of the bullion banking sector. While only Pegadaian and BSI have received permits so far, the government has indicated that more licenses could be issued to other financial firms that meet the stringent capital requirements. The formation of the Indonesia Bullion Market Association (IBMA), initiated by state-owned enterprises including Pegadaian, Freeport, Antam, and BSI, suggests a collaborative effort to develop industry standards and facilitate the growth of the gold ecosystem.
Conclusion
Indonesia’s launch of bullion banks represents a strategic effort to redefine its relationship with natural resources. By moving up the value chain from raw ore extraction to sophisticated financial management, the country aims to capture more wealth within its borders and insulate its economy from external shocks. The success of this initiative will depend on the government’s ability to build public trust, implement robust regulations, and effectively link financial services to the real economy. If successful, this model of resource-based financial development could serve as a precedent for other commodity-rich nations seeking to maximize the potential of their natural wealth.
Key Points
- Indonesia launched its first bullion banks, Pegadaian and Bank Syariah Indonesia, to integrate gold into the domestic financial system.
- The initiative aims to monetize an estimated 1,800 tons of privately held gold and reduce reliance on imports.
- Freeport Indonesia has achieved the ability to refine gold domestically to 99.99 percent purity, supplying Antam with 30 tons over five years.
- Government projections suggest the sector could add Rp 245 trillion to GDP and create up to 1.8 million jobs.
- Regulations require a minimum capital of 14 trillion rupiah for institutions offering bullion services.
