Islamic Investors Could Ignite Gold Bull Market
Islamic investors have shied away from gold investment because religious laws have offered conflicting advice about it. Islamic financial institutions, which hold over $2 trillion in assets, don’t have much invested in precious metals.
However, a Sharia gold standard is to be implemented soon, meaning that approximately one hundred million active Muslim investors will have gold as an investment option.
If only a small percentage of the $2 trillion in Islamic finance assets move into gold products in 2017, the gold market will have a huge new source of demand, pushing gold prices higher in 2017.
A press release by the developers of the gold standard, the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions, and the World Gold Council announced the release of the standard’s exposure draft. The organizations will meet this month to finalize the gold standard draft and set the implementation schedule.
Islamic finance is growing rapidly, and it will be an ongoing source of gold demand into the future. The industry could reach $5 trillion to $6.5 trillion by 2020.
Given its long history as a currency and storehouse of wealth among Muslims, expectations are high that the Islamic finance industry will quickly embrace gold investments. Gold’s recent pullback offers a good entry point.
The catalysts for gold to climb higher remain. Central banks’ zero interest rate policies and global currency instability are driving investors to gold’s stability. Also, global political uncertainty has added to gold’s allure.
The fundamental reasons for gold’s long-term bull market remain in place. One hundred million Islamic gold investors are waiting in the wings to start buying. Investors should buy gold at these lower prices while they have the chance.