Gold Prices Eases following Plateau Reached in 4Q 2012

Gold Prices Decline after its Long Rally
Gold Prices Decline after its Long Rally

CEIC Indonesia Data Talk: Gold prices in Indonesia have declined this year, consistent with changes in international gold prices. As of the end of May 2013, the Indonesian Commodity Exchange Board (Bappebti) quotes a daily average price of IDR451,700 per gram for the one-month delivery of gold compared to its peak daily average price of IDR558,000 per gram on 14 December 2012. The relatively poor performance of gold prices this year had been heralded by plateauing gold prices at the end of 2012; previously, retail prices of gold across Indonesia practically doubled during the 2009-2011 period due to global economic uncertainties. The changes in gold prices saw its associated component in the consumer price index decline by 2.86% year-on-year as of May 2013 – previously, the index grew as much as 27.10% year-on-year as of September 2011, though growth subsequently petered out during the second half of 2012. Given the relatively low weighting of gold prices in the index – approximately 2.40% as of March 2013 – the impact on the overall consumer price index is relatively muted, if at all noticeable. Despite this, Indonesia’s core consumer price inflation has been decelerating since November 2012 (from 4.59% year on year during October 2012 to just 3.99% during May 2013), arguably reducing the necessity of gold as a shield against inflationary pressures. While the downward trend in gold prices was observed across all regions, there were some broad disparities in average retail prices of gold across various regions. During December 2012, gold retail prices for all carats averaged as low as IDR401,172 per gram at Pangkal Pinang, compared to a high of IDR583,750 per gram at Ambon. In general, gold prices tend to be slightly dearer in the eastern regions (Maluku and Kalimantan, among others) as opposed to Sumatra, though retail prices of gold have been generally above average at Banda Aceh (located on Sumatra Island) since early 2012. Current global trends suggest the end of an era for the recent gold price rally as investor confidence returns into other asset classes, notably equities. The diminishing fears of inflation globally, in part, has somewhat obviated the need for holding gold – despite successive quantitative easing measures by monetary authorities around the world, the fear of inflation has been somewhat outweighed by tepid growth in the real sector. Indeed, as in the case of Indonesia, the spotlight is now shining on the present disinflation witnessed in the core inflation index and the month-on-month deflation (falling prices) observed during April 2013. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By W. Meytha - CEIC Analyst Back to Blog

14th June 2013 Gold Prices Eases following Plateau Reached in 4Q 2012

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