SGX Launches World’s First Shariah-Compliant Gold Futures Contract

The move bolsters Singapore’s position as an international centre for Islamic finance.

Singapore Exchange (SGX) announced today that its Singapore Kilobar Gold Contract has become the world’s first Shariah-compliant gold futures.

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SGX launched the world’s first exchange-traded, physically delivered wholesale gold futures in October 2014, in partnership with the World Gold Council and the Singapore Bullion Market Association, as reported by Finance Magnates.

As per SGX’s statement, the contract is now certified by Amanie Advisors, an advisory firm specialising in Islamic finance solutions, to be in compliance with the Shariah Standard on Gold as set out by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

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We expect a considerable increase in demand for gold in South-East Asia as a result of the new standard.

William Chin, Head of Metals and Bulk Commodities at SGX, commented: “This unlocks a new investment and risk management option for the rapidly growing Islamic finance industry estimated to hold about $2 trillion in assets. It also strengthens Singapore’s position as an international centre for Islamic finance, and builds on our vision to develop a global trading hub for gold.”

Natalie Dempster, Managing Director for Central Banks and Public Policy at the World Gold Council, added: “We are delighted that the SGX contract has been certified Shariah compliant. We expect a considerable increase in demand for gold in South-East Asia as a result of the new standard, and this will offer investors a great way of buying kilobars via an exchange.”

The development will appeal to new customers in the region, especially Indonesia and Malaysia, and will also drive innovation in Islamic investment products.

The Singapore Kilobar Gold Contract seeks to serve as a transparent and centralised Asian price-discovery platform for the gold market. Globally, around 60 percent of the precious metal is traded in Asia.

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