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Islamic law embraces gold, opens new investment opportunities

by Greg Klein | December 6, 2016

Islamic law embraces gold, opens new investment opportunities

A year of consultation opens “a new investment asset class, enabling Islamic banks and other
financial institutions to grow their customer bases and facilitating the creation of a broader range
of saving, hedging and diversification products,” the WGC stated.

 

A new gold standard has been set as the yellow metal becomes Shari’ah-compliant. Replacing some complex and fragmented rules, the new regulations will aid the Moslem world in buying, selling and investing in gold as both a currency and commodity. Formally announced December 6, the development follows collaboration between the World Gold Council and the Accounting and Auditing Organisation for Islamic Financial Institutions. The latter group sets rulings on financial practices in accordance with Islamic law.

Gold has motivated civilizations through the centuries to aim higher and strive harder. Gold is more than just a financial asset—it is an integral component of human life.—Hamed Hassen Merah
AAOIFI secretary-general

“The addition of gold will provide Islamic investors with a vast, safe asset class that is highly accessible in times of need,” stated the WGC. “This will help to reduce systemic risk in Islamic finance, making the market safer and smoother for all investors.”

Speaking like a confirmed gold bug, AAOIFI secretary-general Hamed Hassen Merah said the metal “has motivated civilizations through the centuries to aim higher and strive harder. Gold is more than just a financial asset—it is an integral component of human life.”

The parties credit the metal with lower volatility than many major Islamic investment tools and an opportunity for risk management where Islamic law bars derivative-based instruments such as credit default swaps, futures and forwards.

The regulations follow a year of consultation with scholars from 15 countries and all major schools of Islamic law, along with representatives of central banks, Islamic financial institutions and the gold industry, according to the AAOIFI.

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