The Global Gold Investment Markets: Traits for Sharīʿah-Based Investment Solutions

The resilience of gold as a commodity

The World Gold Council (WGC) states that since 2001, investment demand for gold worldwide has grown by an average of 15% per year. This growth has been driven in part by the advent of new ways to access the market, such as physical gold and gold-backed exchange-traded funds (ETFs), as well as by the expansion of the middle class in Asia and a renewed focus on effective risk management following the 2008–2009 financial crisis in the United States and Europe.

Essentially, gold investment has many characteristics which make it an important asset class, including:
• Source of long-term returns
• Highly liquid asset
• Portfolio diversifier
• Risk mitigator

Sharīʿah-compliant gold investment products have the potential to grow and attract a much larger base of international institutional as well as retail investors worldwide.

As a strategic asset class, gold has emerged as a strong candidate for the development of innovative Sharīʿah-compliant financing and investment solutions, driven by a defined social value purpose to serve societies and communities around the world.

Building this business proposition into something that achieves these goals and enhances the social value delivered by Islamic finance will require strategic collaborative efforts across market participants and governments in countries where key Islamic financial markets exist, in order to design clear visions and policies that support market development.

This report initiates a discussion of the above by providing an overview of global gold market supply and demand patterns, as well as key markets and players, followed by a brief analysis of the gold supply chain, main actors, and financing requirements across upstream and downstream phases. It then moves on to the research questions: the case for Sharīʿah-compliant investment solutions, and the regulatory and sustainability imperatives supporting the view that a Sharīʿah-based approach can be built around a “two-goal” concept—the objectives of the Sharīʿah (Maqāṣid al-Sharīʿah) and the goals of ESG and the SDGs.