Gold in Islamic finance: retail investor insights

Sectors: Market insights

Following the launch of the AAOIFI Shari’ah Standard on Gold in 2016, we have engaged with Islamic banks and financial institutions to develop the market for Shari’ah-compliant gold-backed products. As part of this, we conducted detailed qualitative and quantitative research across four predominantly Muslim markets: Turkey, Saudi Arabia, United Arab Emirates and Malaysia.

The aim of the research was to understand how investors view Islamic finance, their attitudes towards gold and their preferences for gold-backed products. It uncovered valuable insights that will help banks and other institutions to launch gold-backed financial products that meet the most appeal to Islamic investors.

  • Islamic products are highly regarded. Most respondents prefer some exposure to Islamic finance and many are likely either to start investing in Shari’ah-compliant financial products or increase their holdings over the next 12 months.
  • Almost half of all respondents believe Islamic investments are safer and more ethical than conventional products.
  • Most believe that investing in gold can protect their wealth and generate long-term returns.
  • Investors are attracted to a range of gold investments – bars and coins, vaulted gold and gold-backed ETFs – and there is potential for growth across the range of gold products.
  • Bars and coins are considered simple, familiar and tangible but investors would welcome greater clarity around ease of trading, fees and purity.
  • Vaulted gold is considered safe, convenient and accessible but investors would welcome vaults close to home or in trusted jurisdictions, settlement in physical gold and speed at point of sale.
  • Gold-backed ETFs are considered secure, easy to trade and similar to stocks and shares, but investors would welcome settlement in physical gold rather than cash and, possibly, clearer terminology.
  • Some investors prefer to find out about gold investment online; some prefer to use financial intermediaries, and some rely on friends and family.

Across the board, there is an interest in gold products and a willingness to increase investment. Our research also shows that demand for Islamic finance is likely to grow in the future. Provided investor needs are addressed and marketing is tailored to different investor groups, the Islamic gold market should expand, develop and flourish - benefiting investors, product providers and the entire Islamic finance world.

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