Is the Sharia Standard on Gold a Game-Changer?Blake Skadron
There are a number of factors which could significantly boost the value of gold over the next few years, but one in particular has significant potential, and it’s coming from the last place you might expect—sharia Law. The sharia standard on gold was established in early December, and it could open up the market to millions of new potential investors.
Gold in Islam
For those of the Muslim faith there have always been significant religious barriers to the owning of gold. It can be purchased as jewelry, but not traded as a future. Buying and selling gold as a commodity, on the other hand, is more difficult. It’s not expressly forbidden, but the details have always been difficult to interpret.
Now, however, the sharia standard on gold has been established, the purpose of which is to establish clear-cut buying and selling practices for the commodity which meet all Muslim religious requirements.
The rules have been reformed as a result of joint efforts between the World Gold Council (WGC) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Now, the sharia standard on gold has opened up the market on a wide scale.
The Potential of the Sharia Standard on Gold
The potential ramifications of this standard are significant. By opening up the market to the Muslim world, emerging-market countries can gain greater access to new forms of wealth. If just 2% of Islamic investors choose to take advantage of this new opportunity to purchase gold, the market could skyrocket. In fact, that small percentage of asset allocation could result in gold demand reaching highs similar to China’s total expenditure in 2016.
Sharia-compliant gold investment products are likely to become more diverse as a result of the news, which has been described as “a ground-breaking initiative for Islamic investors and for the gold industry” by the World Gold Council’s chief executive officer, Aram Shishmanian.
Approximately 1.6 billion people make up the global Muslim population—roughly 25% of the world’s inhabitants. Now that a sharia-compliant gold standard has been developed, the profit potential is huge.
With such an enormous new potential market, the sharia standard on gold opens up massive future demand. Experts predict that while it may take up to six months for the effects of this new policy to begin to be felt globally, by 2020 the Islamic finance market could grow by as much as $5 trillion.
This means that now may be the perfect time to invest in gold. The price is still relatively low, but over the next few years it stands to explode. By investing now, you can secure your nest egg for the future.