Four Critical Roles That Gold Can Play

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The launch of the Shari’ah Standard on Gold will not simply facilitate more Shari’ah compliant investment; it can open up an entire asset class to the Islamic finance community. As such, it can help to shape the future of Islamic finance.

Gold is a powerful investment tool that can benefit Islamic investors

Gold’s distinctive qualities as a diversifier, risk management tool and long-term preserver of wealth mean that it fills critical missing links in the current array of options available to Islamic investors. Virtually any Islamic portfolio can be improved through some allocation to gold, implying that gold can boost returns for every class of Islamic investor. In essence, this asset class is a Pareto improvement to Islamic finance.

Gold significantly enhances the Islamic investment universe

Islamic finance currently lacks a true safe haven asset. Fund flows during times of acute market stress may cause price dislocation and liquidity shocks. Current low risk Islamic assets are either too limited in size or too illiquid. The addition of gold will provide Islamic investors with a vast, safe asset class that is highly accessible in times of need. This will help to reduce systemic risk in Islamic finance, making the market safer and smoother for all investors.

Gold can power the next stage of Islamic finance’s development

The inclusion of gold as a Shariah-compliant asset opens up an entirely new asset class, allowing for new opportunities to innovate and expand.

A distinctive asset in a distinctive market

Gold is a distinctive asset. Through the centuries, gold has motivated civilisations to aim higher and strive harder. It has ushered in scientific advances while also sparking artistic genius. Gold is not simply a unique financial asset; it is an integral and inspiring component of the human story. It is perhaps fitting therefore that this most ancient of elements is now able to power the future of Islamic finance.

 

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