Gold In Indonesia | Gainesville Coins

11. Indonesia

By Gainesville Coins
Published June 24, 2015

indonesia flag

2013 Demand: 68 tonnes

Jewelry/Coin & Bar: 37.9 tonnes/30.1 tonnes

Reserves: 78.1 tonnes

% of Total Forex Reserves: 3.45%

2013 GDP: $1.3 trillion

D^g:GDP: 0.24%


Indonesia has traditionally been both one of the largest consumers and producers of gold in the world. However, it has also endured having its most precious resource extracted and capitalized on by foreign mining companies. Now, the mineral-rich island nation is shifting toward controlling the fabrication of its own gold into value-added products such as coins and jewelry. For Indonesia, gold represents a means for greater economic self-determination.

Indonesia State Interests

State Interests:

On the policy level, Indonesia recently instituted a ban on the export of raw metal ore in an attempt to increase state revenue. In addition to gold, India is also one of the world's largest producers of nickel and copper. The export restrictions are an attempt to prevent raw ore from leaving the island before it can be refined and manufactured into value-added products. These higher value items offer greater profit margins than the export of raw commodities such as gold ore does.

Although these bans were first instituted in 2009, the state has been forced to make exceptions and gradually implement the policy in order to discourage outright divestment by the large mining companies. For example, Freeport-McMoRan Copper & Gold Inc. and Newmont Mining, two of the world's preeminent gold mining enterprises, are still permitted to export copper-gold concentrates (at increasing tax rates) over the next three years, a compromise on the part of the Indonesian government.

Commercial Interests:

Freeport and Newmont each have held long-standing Contract of Work and Mining Business licenses with the Indonesian authorities. Both are active in the Grasberg Mine, the world's largest open-pit mining site, located in the eastern Papua province. Grasberg is also the world's largest gold mine—and perhaps Indonesia's greatest asset. Its accounted for some 1.2 million ounces of gold in 2013 according to Freeport, who owns over 90% of the massive mine. Despite the high output, many citizens resent the big miners for benefiting disproportionately from Indonesia's natural resources. Local residents have been forced to face the glaring irony that the Grasberg area is in the middle of one of the country's most impoverished, economically disadvantaged regions, a reality which is heightened by the contrast to these foreign miners' enormous profits.

Indonesian Gold Bars

Civilian Uses:

A large portion of the consumption of gold coins and bars in Indonesia is made up by gold dinars, the traditional Islamic gold coin. Along with Indonesia's move toward a form of resource nationalization, the people have engaged in their own small-scale gold mining activity. These regrettably entail the open-air burning of mercury in residents' backyards in order to transform gold ore into usable nuggets, which can then be sold at a modest profit. While large-scale industrial refineries are prohibited from using mercury in their refining processes, there is currently no such ban on smaller operations carried out by individuals. For now, the incentives for pursuing these local refining projects using mercury continue to outweigh the possibly devastating environmental repercussions of this practice. The widespread character of these minor mining and refining projects speaks to the Indonesians' desire, even at great costs, to assume control of their own resources and economic well-being.

Did You Know?

The 19th century Royal courts of Bali, Indonesia, were known for their highly skilled craftsmanship of gold vestiges, particularly crowns. Nicknamed “The Island of Hinduism,” Bali is home to the majority of Indonesia's Hindu minority. Much like the Hindu population of India, the Balinese assign a high spiritual and social significance to gold. This 19th century queen's crown was crafted around 1890, and probably worn during a wedding ceremony, to display the wealth and prestige of King Gusti Agung Gede Agung. The crown is made from the finest gold available at the time, probably 22 karats, and is adorned with diamonds, rubies, and sapphires. Indonesia is also known for producing commemorative bullion coinage through their central bank, the bank of Indonesia. Indonesian commemorative coinage is denominated in their local currency, the Rupiah.

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