Indonesians are flocking to gold for investment purposes as returns on financial investments diminish, a director at state-owned miner PT Aneka Tambang Tbk said on Wednesday.
Demand for the yellow metal traditionally has been driven by jewellery sales in Indonesia but now people are looking to invest in gold by buying gold bars, Alwin Syah Loebis, Antam operations director, said in an interview.
A steady drop in interest rates, which have fallen to 8 percent from 12.75 percent in late 2005, also encourages a shift towards gold away from stocks and bonds, said Loebis. "People are starting to look at gold as an investment tool. As they are more educated now, they have learned not to put their investment in one basket but diversify into mutual funds, stock market and gold to spread risks," he said.
At PT Logam Mulia, one of Antam's unit and the only precious metal refinery, sales of small gold bars of 100 grams reached 1.73 tonnes in 2007, up from just 0.45 tonnes in 2006.
"The small bars are attracting individual investors," Loebis said, adding smaller bars gave them more flexibility to sell when they needed cash. Loebis did not give details on the company's gold sales this year, but was upbeat on the outlook. "Gold is a rare commodity. So people will still invest in gold although it's expensive. They expect its value will rise further," he said.
Logam Mulia has a refining capacity of 75 tonnes of gold a year but only refines about 28 tonnes of gold currently due to dwindling gold supplies from Antam's Pongkor gold mine in West Java and from other local gold mining companies.
Loebis said plans by the company to acquire gold mines this year was partly driven by the need to fill refinery capacity. "It is our strategy to optimise our refinery capacity," he said, adding the company had shortlisted a number of gold mines for possible acquisition. He declined to name the targets.
Antam has said it aims to produce 15 tonnes of gold a year by 2017, from around 3 tonnes a year currently, partly to reduce its reliance on nickel output. Nickel accounted for around 90 percent of Antam's revenue.
The company sold 5 tonnes of gold in 2007 for both exports and domestic sales, up from 3.34 tonnes in 2006. Revenue from gold sales rose 58 percent to 1.03 trillion rupiah ($111.5 million) in 2007. Indonesia is expected to produce 134.56 tonnes of gold in 2008, up from 122.33 tonnes last year. Indonesian gold output accounts for about 5-6 percent of global output. Gold prices have gained more than 30 percent in 2007 and risen as much as 12 percent so far this year.