SGX's kilobar gold futures contract gets Shariah-compliant status

THE Singapore Kilobar Gold Contract of Singapore Exchange (SGX) has become the world's first Shariah-compliant gold futures contract.

SGX said this endorsement by Islamic scholars on its physically settled futures contract unlocks a new investment and risk management option for he rapidly growing Islamic finance industry estimated to hold about S$2 trillion in assets.

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

William Chin, head of metals and bulk commodities at SGX, said the move strengthens Singapore's position as an international centre for Islamic finance, and builds on the vision to develop the island nation into a global trading hub for gold.

Natalie Dempster, managing director for central banks and public policy at the World Gold Council, projected a considerable increase in demand for gold in South-East Asia will arise as a result of the new standard, and this will offer investors a great way of buying kilobars via an exchange.

Albert Cheng, chief executive officer of the Singapore Bullion Market Association, said the Shariah-compliant SGX contract will be attractive to new customers in the region, particularly Indonesia and Malaysia.