What if 25% of the world’s population was unable to buy gold, and then suddenly one day they were? Believe it or not, this remarkable event has just happened with an unprecedented change to Sharia Law. The potential for a run on gold is high.
No wonder that gold and silver are up over 8% and 14%, respectively, in 2017.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the World Gold Council (WGC) have just created — for the first time – specific rules for the use of gold as an investment in the Islamic finance industry.
Overnight, this move brings 1.6 billion new buyers into the physical gold market. According to the WGC, the new rules could spur demand for hundreds of tons of gold coins and bars.
Historically, Islamic investors have spurned gold products because religious laws have offered conflicting advice about gold. The financial and personal lives of Muslims are guided by Sharia law, which is based on the Koran and other sacred texts.
With these new rules in place, it is likely that asset managers in key Islamic finance countries such as Qatar, Indonesia, Bahrain, Malaysia and Saudi Arabia will begin to aggressively pursue gold.
Imagine… if Islamic financial institutions allocate just two percent of the assets they manage to gold, it would equal roughly 1,000 tons of extra demand!
That is roughly equivalent to today’s total yearly demand from China.
WGC CEO Aram Shishmanian says this is a groundbreaking initiative for Islamic investors and the gold industry at large. With gold already known as a proven wealth preservation asset and a universally-accepted alternative currency, demand is likely to skyrocket in the Muslim world.
GOLD: THE FIRST LINE OF DEFENSE IN A DANGEROUS VIRTUAL WORLD
Technological change is increasing at dizzying speeds. 2017 promises to usher in more daunting challenges for the way we work, communicate and play. It also creates numerous new ways that criminals can destroy your paper assets with a keystroke.
According to the BBC, the following four technology trends in the coming year make owning precious metals more important for your financial future than ever before:
Cyber “security” — After Russian interference in the U.S. presidential election, future technology innovations will be undermined by data thefts, fraud and cyber propaganda. Professor Richard Benham, chairman of the National Cyber Management Centre, believes that a major bank will fail as a result of a cyber-attack in 2017 leading to a loss of confidence and a run on the banking system. As the world becomes more connected (e.g. smart homes, sensor-laden cities, etc.), the greater the opportunity for hackers to wrack havoc on our society, financial markets and financial institutions. Are you willing to keep all your wealth in electronic form that any hacker can steal or can be erased with the stroke of a keyboard?
Artificial “intelligence” — The drive to enable machines to learn, adapt to new circumstances and make decisions shows no signs of stopping. But artificial intelligence can also help hackers get access to a new wealth of data as well, threatening a cybersecurity arms race. Do you trust “thinking” machines to safeguard your assets when the next financial crisis hits?
Augmented and virtual “reality” — The lines between reality and virtual reality are becoming more blurred as mixed reality technology advances. Owning physical gold and silver is a tangible store of wealth grounded firmly in reality and impervious to computer theft, hacking or fraud.
Automation — Jobs keep disappearing from call centers and customer service centers and automation is taking over manufacturing. Will our politicians and central bankers have the courage to fight structural unemployment and create jobs for people in this new global economy? More to the point, are you willing to risk your financial future that they will?
EXPERTS EXAMINE THE GOLD MARKET
Former Fed Chairman Dr. Alan Greenspan maintains deep concerns about economic prospects in the developed world and is bullish on gold. According to Greenspan, significant increases in inflation will ultimately increase the price of gold and investing in gold now is much-needed insurance.
Deputy Governor of Central Bank of the Republic of Turkey Erkan Kilimci explains that as gold has no credit risk, is one the safest assets to hold and its liquidity is a useful component of any portfolio. Cambridge Associates Chief Investment Strategist Celia Dallas sees gold as a crucial investment in a world beset by uncertainty. Dallas favors gold in the current environment of swollen central bank balance sheets and competitive currency devaluations.
With political uncertainty rising in Europe and with crucial elections ahead in Germany, France and the Netherlands, Suki Cooper, Precious Metals Analyst at Standard Chartered Bank, believes gold demand is poised to rise. Cooper thinks gold will see broad-based safe-haven demand in the event of systematic risk such as the great recession.
Recent conflicting signals from the Fed have caused market uncertainty to go up and gold has benefitted. U.S. Global Investors’ Frank Holmes says that it is important for investors to ignore the noise and look at broader economic signals for where gold is heading.
Kevin Caron, market strategist at Stifel Nicolaus, expects the trend line in gold prices to rise but a more moderate pace than we have seen in recent years. Danske Bank analyst Jens Pederson thinks that if Trump announces significant fiscal easing, that would raise inflation expectations and lead investors into gold. He also says that political uncertainty would rise in any U.S/Mexico trade war and that is positive for gold over the long term.
GOLD: DEMAND TRENDS ARE ON YOUR SIDE
With the new Sharia gold standard in place for Islamic investors, 20% of the world’s population will now have new access to gold as an investment. If the expected increase in Islamic demand materializes, a further spike in gold prices is ever more likely. Combined with accelerating technological change that makes paper-based assets more vulnerable, you can see why gold deserves a prominent place in your retirement portfolio.
Robust global gold demand trends are on the side of gold investors today!
