New Islamic finance guidance on gold emphasizes real deal
Islamic finance experts have developed new rules for gold transactions, they said yesterday, potentially opening the way for Islamic institutions to trade gold and silver much more actively. Gold transactions must be fully backed by physical metal and settled on the same day, the developers of the new guidance said, to observe Islam’s distinction between real economic activity and speculation.
Traditionally, gold has played a very minor role in Islamic finance and there has been little activity beyond spot trading, partly because of uncertainty over what is religiously permissible. The new standards, which also apply to silver, could help to change this. The Bahrainbased Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) spent a year working out the new rules on gold trading and agreed them last month.
AAOIFI developed its guidelines with the World Gold Council (WGC), a London-based market development body, to clarify existing Islamic rulings on bullion and make it easier to conduct complex transactions. The guidelines will help to increase acceptance of gold products among Islamic investors while giving Islamic banks new liquidity-management tools, said Hamed Hassan Merah, secretarygeneral of AAOIFI, whose standards are followed in whole or in part by sharia-compliant banks around the world. — Reuters