Gold is acceptable for the first time as an investment in Islamic finance after the group that sets standards for the industry adopted Shariah-compliant rules for trading the metal.
The rules approved last month allow gold to be used in the $1.88tn Islamic finance business, the Accounting and Auditing Organization for Islamic Financial Institutions said early this month. The AAOIFI developed the standards with help from the producer-funded World Gold Council, which has said the new rules could spur demand for “hundreds of tons” of gold.
“This is a ground-breaking initiative for Islamic investors and for the gold industry at large,” Aram Shishmanian, chief executive officer of the World Gold Council, said in the joint statement. “We are delighted that there is now definitive Shariah guidance on the permissibility of investing in gold.”
Gold joins equities, real estate, Islamic bonds (sukuk) and takaful (insurance) as vehicles approved for Islamic finance, according to the Bahrain-based AAOIFI. Sukuk volume slipped 1.4% in 2015 after the Malaysian central bank terminated its short-term sukuk issuance programme, the AAOIFI said.
“The time has come for gold instruments in Islamic finance,” Mark Mobius, executive chairman of Templeton Emerging Markets Group, said in a December 5 World Gold Council report accompanying the statement. The report didn’t say if Templeton plans to invest in the product.
A customer buys gold at a jewellery shop in Bangkok. Gold joins equities, real estate, Islamic bonds (sukuk) and takaful as vehicles approved for Islamic finance, according to the Bahrain-based AAOIFI.
