The Standard enables a number of well-established products to be structured in Shari’ah-compliant way, catering to the financial needs of both retail and institutional investors. We have developed a series of introductory brochures which introduce these products, and their Shari’ah considerations.
Five most important principles of the standard
The Standard sets out the conditions that must be met when investing or transacting in gold, removing any fear over non-compliance for the world's 1.6 billion Muslims.
Gold must be traded on a spot basis (hand to hand).
This means that conventional forwards and futures are not possible.
Gold can be owned on a physical OR constructive basis
This is very important as it allows gold products to be structured.
In the case of constructive posession, gold has to be fully allocated.
Unallocated gold is not permissible. No paper gold products are allowed.
Allocation can occur through either T+0 settlement OR the receipt of a certificate/email specifying bar ownership.
This is because in Islamic Finance you MUST own something before you are allowed to sell it.
It is permissible to own gold jointly, where each partner owns and undivided beneficial interest in a Trust.
This is important for structuring purposes, such as for some physical gold ETFs.
Shari’ah compliant gold products
The Standard allows many gold investment products to be structured in a Shari’ah-complaint way. All products must be physicall backed and fully allocated. Some of the most popular products include:
Retail market - smaller holdings
Gold investment accounts
Ad hoc purchases of gold, often online via a bank or non-bank financial institution. The gold is fully allocated and professionally stored on the owner’s behalf. The owner can take physical delivery if they wish.
Gold saving plans
Similar to investment accounts but where the consumer buys gold regularly.
Gold certificate programmes
Ad hoc or regular purchases of gold, evidenced through the issuance of a certificate
Investment market - larger holdings
Physical gold ETFs
Fully backed gold funds traded on an exchange used by both individual and institutional investors.
Gold spot contracts
Exchange-traded contracts are often used by end-users of gold such as fabricators and jewellerys, or investors seeking quick physical delivery of a large amount of gold.
Gold backed Sukuk
Often based on the Ijarah structure
In addition, there are several other transactions and uses of gold covered by the Standard, including gold as capital (Salam), gold leasing (Ijarah), gold collateral (Rahn), security deposits (Hamish Jiddyyah) and unilateral promises (Wa’d).