The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) – which establishes standards for Sharia compliant finance (aka: Islamic banking or Islamic finance) – officially announced that it has worked with the World Gold Council to develop new standards to make gold investments compliant with Sharia law.
Sharia compliant finance has some rules that apply to currency, and other rules that apply to commodities. Since gold has acted as one, the other, or both throughout history, there has been longstanding controversy over whether or not Sharia law, which guides both the personal and financial lives of Muslims, permits gold bullion ownership and/or investments.
Essentially, the new rules require that a bank selling gold has to offer same-day settlement or has to demonstrate it can provide the exact gold being sold within one day. Because of these stipulations, bullion-backed ETFs such as the SPDR Gold Trust (GLD) are expected to qualify – while gold futures like COMEX will not. Specific, Sharia-compliant gold investments are expected to be announced in the near-future.
Islamic finance is a market worth an estimated $1.88 trillion. With these new rules for gold in place, the demand for gold may see some growth. Download our app so you can keep tabs on any price changes for gold.