Market Update Investor insights: gold in Islamic investment

Sectors: Market insights, Demand, Investment

Download

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.1 As part of this we undertook research to understand how investors view Islamic finance, their attitudes towards gold, and preferences for gold-backed products. The insights summarised in this update will help banks and other institutions to launch gold-backed financial products that meet the needs of modern Islamic investors.

Gold in Islamic finance

Gold has a long association with Islamic finance. For centuries, the gold Dinar was the currency and trading standard of the Islamic world. But as Islamic finance grew and developed, so did the need for clarity around the Shari’ah treatment of gold.

In 2016, the rules for trading gold were codified in a single Standard: the AAOIFI Shari’ah Standard on gold. This removed one of the barriers preventing the development of gold-backed products in Islamic finance. 

Since then, the World Gold Council has been working with Islamic banks and other financial institutions to further develop this market. As part of our engagement, in 2018 we partnered with global research agency Kantar TNS to conduct a comprehensive survey of 4,000 retail investors in four predominantly Muslim markets – Saudi Arabi (KSA), United Arab Emirates (UAE), Turkey and Malaysia – to gauge their attitude and approach towards Islamic investing and gold.2

Islamic investment trends

Islamic finance is a large market. In 2017, total assets surpassed US$2tn for the first time. And it is growing: some estimates suggest a long-term compound average growth rate of over 9%.3

This positive outlook is reflected in the findings from our research. Two-thirds of those we surveyed would prefer their investment holdings to include Islamic products. Just under one third, on average, would prefer to hold purely Islamic investments (Chart 1).

Chart 1: Preference for Islamic investments

Chart 1: Preference for Islamic investments

Sources: Kantar, TNS, World Gold Council; Disclaimer

 

1In 2016, the Accounting and Auditing Organisations for Islamic Financial Institutions (AAOIFI) and the World Gold Council collaborated to develop an international Shari’ah Standard for gold. For more information, visit shariahgold.com

2For detail on the research methodology and sample, see World Gold Council, 'Gold in Islamic finance: retail investor insights’, 2018

3IFSB, Islamic Financial Services Industry Stability Report, 2018

Copyright and other rights

© 2019 World Gold Council. All rights reserved. World Gold Council and the Circle device are trademarks of the World Gold Council or its affiliates.
All references to LBMA Gold Price are used with the permission of ICE Benchmark Administration Limited and have been provided for informational purposes only. ICE Benchmark Administration Limited accepts no liability or responsibility for the accuracy of the prices or the underlying product to which the prices may be referenced. Other third-party content is the intellectual property of the respective third party and all rights are reserved to them. 

Reproduction or redistribution of any of this information is expressly prohibited without the prior written consent of World Gold Council or the appropriate copyright owners, except as specifically provided below.

The use of the statistics in this information is permitted for the purposes of review and commentary (including media commentary) in line with fair industry practice, subject to the following two pre-conditions: (i) only limited extracts of data or analysis be used; and (ii) any and all use of these statistics is accompanied by a citation to World Gold Council and, where appropriate, to Metals Focus, Refinitiv or other identified third-party source, as their source.

World Gold Council does not guarantee the accuracy or completeness of any information. World Gold Council does not accept responsibility for any losses or damages arising directly or indirectly from the use of this information.

This information is not a recommendation or an offer for the purchase or sale of gold, any gold-related products or services or any other products, services, securities or financial instruments (collectively, “Services”). Investors should discuss their individual circumstances with their appropriate investment professionals before making any decision regarding any Services or investments.

This information contains forward-looking statements, such as statements which use the words “believes”, “expects”, “may”, or “suggests”, or similar terminology, which are based on current expectations and are subject to change. Forward-looking statements involve a number of risks and uncertainties. There can be no assurance that any forward-looking statements will be achieved. We assume no responsibility for updating any forward-looking statements.