Gold allocation improves portfolio efficiency, although gold prices remain vulnerable to high rates.
JAKARTA – Analysis by the World Gold Council (WGC) highlights gold’s strategic role in maintaining the resilience and efficiency of Indonesian investment portfolios, particularly for institutional investors.
According to WGC analysis, allocating at least 2.5% of a portfolio to gold can generate higher returns with lower shocks or volatility.
Marissa Salim, Senior Research Lead for APAC at WGC, pointed to Indonesia’s investment climate, which has been shaken by inflation driven by the Middle East conflict, BI interest rate policy, and pressure on capital markets from global index providers such as MSCI and FTSE Russell.
“Given these conditions, gold remains a promising asset for both institutional and individual investors,” she said in WGC’s latest report, cited on Saturday (16/5).
While the Jakarta Composite Index (JCI) plunged as much as 18.5% during the first quarter of 2026, gold rose 14.5% in rupiah terms, second only to the performance of United States government bonds (US Treasuries).
According to WGC simulations, compared with a baseline scenario — a portfolio comprising 60% domestic equities and 40% government bonds — an allocation of up to 10% in gold could increase returns from 4.9% to 6%, while reducing volatility from 10.7% to 9.3%.
However, the simulation used a relatively limited gold allocation of between 2.5% and 10% of the total portfolio, indicating gold’s role primarily as a diversification or hedging instrument to dampen volatility.
In addition, the simulation was based on gold prices denominated in rupiah (XAUIDR), meaning the portfolio’s improved performance reflected not only higher global gold prices, but also the effect of rupiah depreciation against the US dollar.
On the other hand, Marissa noted that despite various crises over the past 20 years, gold has continued to generate higher returns than global equities, Indonesian equities, and other commodities.
WGC data showed gold recorded a compound annual growth rate (CAGR) of 29.1% over the past five years, while remaining relatively resilient at 14.7% over the past two decades.
However, Shaokai Fan, Head of Asia-Pacific ex-China at WGC, also acknowledged that high interest rates — particularly in the US — could weigh on gold prices going forward.
“We will continue monitoring the direction of interest rate policy, especially as the conflict in the Middle East appears prolonged and could pressure oil supply,” Shaokai said.
“I think that will be an important factor in monitoring gold’s performance this year,” he told IDNFinancials during the WGC Gold Demand and Trend Q1 2026 event on Wednesday (13/5). (ZH)
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