Over the last two decades, Indonesians have grown increasingly aware of the importance of investing, not just to grow wealth, but also to protect it from inflation. With various asset classes available-such as stocks, gold and foreign currencies-investors constantly seek the most reliable vehicle to preserve purchasing power and generate real returns.
This article dives deep into a 20 year comparison (2005-2025) of year on year (YoY) growth of the IHSG (Indeks Harga Saham Gabungan), gold and the U.S. dollar (USD to IDR exchange rate), compared against the Indonesia inflation rate. The analysis is based on data processed from BI.go.id, Investing.com and FXTop.com as of July 6, 2025, smoothed using a 6-month moving average to enhance readability and trend clarity.
IHSG YoY Performance: Growth Backed by Banking and Mining
The Indonesia Composite Index (IHSG) represents the overall performance of the Indonesian stock market. Between 2005 and 2025, IHSG has shown considerable YoY growth, particularly during Indonesia’s robust post-crisis expansion from 2005 to 2012. Investors who entered the market during these early phases reaped significant capital appreciation, thanks to Indonesia’s status as an emerging market with high GDP growth.
However, IHSG’s performance has been largely driven by two sectors: banking and mining. While banking stocks provide stability-being supported by interest rate margins and consistent loan growth-mining stocks tend to be more volatile, closely tied to global commodity prices like coal, nickel and crude oil.
For example, during the 2021-2022 commodity boom, mining stocks such as PTBA, ADRO and ANTM contributed significantly to IHSG’s upward surge. Yet, when commodity prices softened, so did IHSG’s momentum. Hence, while the IHSG shows long-term upward movement, its YoY trajectory reflects cycles of economic optimism and commodity dependency.
In cumulative terms, IHSG has grown by over 500% since 2005, but when compared to the S&P 500, which saw major gains through technology and service sectors, the IHSG’s trajectory is more moderate and sector-specific.
Gold Investment: Volatile Yet Resilient
Gold is widely viewed as a safe-haven asset, especially during periods of economic uncertainty or geopolitical instability. But surprisingly, its year on year performance has shown greater volatility than many investors anticipate.
The 2008 Global Financial Crisis, for instance, drove gold prices sharply upward as investors fled equities. Again, in early 2020, during the COVID-19 shock, gold surged past USD 2,000 per troy ounce, reflecting global panic. However, as economies reopened and interest rates rose, gold faced significant corrections.
Over the 20 year span, gold has appreciated by over 430% in Indonesian rupiah terms. But the road was anything but smooth. Gold’s YoY changes frequently alternate between double digit gains and corrections, reflecting its sensitivity to inflation expectations, real interest rates and USD strength.
Many seasoned investors adopt a contrarian approach: buy gold when it underperforms your investment target and sell when it outperforms. This tactic treats gold less like a steady grower and more like a tactical hedge.
USD/IDR: Currency as a Hedge Against Inflation
The USD to IDR exchange rate has been a topic of constant interest in Indonesia. As of mid-2025, the exchange rate stands at approximately IDR 16,000 per USD, compared to around IDR 9,500 in 2005. This represents a depreciation of the rupiah by over 65% in two decades.
Such consistent currency depreciation makes holding U.S. dollars an effective inflation hedge, especially for Indonesians whose income or assets are IDR-denominated. Unlike gold or stocks, the dollar doesn’t offer large nominal returns, but it does preserve value and acts as a reliable store of purchasing power over time.
That’s why searches for terms like “dollar to rupiah exchange rate today” remain among the most popular in Indonesian financial media. Whenever global uncertainty rises or Indonesia’s inflation spikes, the dollar is often the first asset people turn to.
Indonesia’s Inflation Rate: The Real Enemy
Inflation erodes the purchasing power of money. While moderate inflation (2-4%) is considered normal, high or inconsistent inflation can weaken savings and fixed-income investments. Over the last 20 years, Indonesia’s inflation rate has averaged between 3% to 5% annually, with occasional spikes due to policy shocks or external factors.
Notable inflation events:
- 2005: A spike to ~17% following fuel subsidy cuts
- 2015 - 2019: Stable inflation due to low global oil prices and tighter monetary policy
- 2020 - 2021: Pandemic-driven deflationary pressures followed by supply-driven inflation spikes in 2022
While inflation hasn’t spiraled out of control, many traditional savings instruments in Indonesia fail to keep up with rising prices. Hence, investing in assets that beat inflation is no longer optional-it’s essential.
Cumulative Performance Comparison (2005-2025)
Here’s a simplified overview comparing cumulative growth:
| Asset | Cumulative Growth (20 Years) | Year-on-Year Volatility | Notes |
|---|---|---|---|
| IHSG | +500% | Moderate | Strong but sector-dependent (banks, mining) |
| Gold | +430% | High | Best during crises, volatile otherwise |
| USD/IDR | +65% | Low | Steady currency depreciation protection |
| Indonesia Inflation | ~110% total (3–5%/yr) | Low | Needs to be exceeded for real returns |
From the table, IHSG offers the highest cumulative growth, making it ideal for long-term capital appreciation. Gold offers crisis protection but is not consistently superior. USD serves well as a preservation tool, especially when IDR is under pressure.
Key Takeaways
- Investing in IHSG yields high returns over time, but its performance is closely tied to Indonesia’s banking and commodity cycles
- Gold investment is essential for diversification, but due to its volatility, it's best used as a complementary asset, not a primary one
- Holding U.S. dollars helps Indonesians protect themselves from currency depreciation and domestic inflation, even if the returns are modest
- Indonesia’s inflation rate, while moderate, still erodes cash holdings. Thus, investing in real assets is critical to preserve purchasing power
- Cumulative growth matters more than YoY swings. What looks volatile in the short term may still outperform in the long run
So, Which Asset Is the Winner?
There’s no definitive winner each asset class plays a different role in a diversified portfolio:
- Choose IHSG if your goal is long-term growth and you're comfortable with market cycles
- Hold gold to hedge against crises and uncertainty
- Maintain USD holdings as a shield against rupiah depreciation and inflation
The ideal investor doesn’t bet everything on one asset. Instead, they allocate capital according to risk appetite, time horizon and macroeconomic context.
Final Thoughts
The past 20 years show that real wealth is built through strategy, not luck. Timing helps, but more important is a clear understanding of economic cycles, inflation and the behavior of each asset class. Regardless of whether you choose to invest in stocks, gold or currency, the key is to stay informed and diversified.
With inflation and uncertainty here to stay, Indonesians must go beyond traditional saving and embrace smart investing to secure their financial future.