Gold has been approved and accepted for the first time as an investment in Islamic finance after the group in charge of setting standards for the industry adopted Shariah i.e compliant rules for trading the metal.
One of the rules approved last month allows gold to be used in the $1.88 trillion Islamic finance business, the Accounting and Auditing Organization for Islamic Financial Institutions said Monday in a statement. 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 and golden opportunity 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 permissability 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. Islamic bonds volume slipped 1.4 percent in 2015 after the Malaysian central bank terminated its short-term sukuk issuance program, the AAOIFI said.
“The time has come for gold instruments in Islamic finance,” Mark Mobius, executive chairman of Templeton Emerging Markets Group, said Monday in a World Gold Council report accompanying the statement. The report didn’t say if Templeton plans to invest in the product.