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CAIRO: The Saudi Arabian gold market may offer investors multiple opportunities due to a recently established commodity exchange-traded fund (ETF) and the implementation of the Kingdom Vision 2030. However, it remains relatively underdeveloped, according to a report on gold investment markets.

Formed in 2021, Albilad Gold ETF is the first Shariah-compliant commodity ETF in the region and will have at least 95 percent of its assets invested in gold. This development will attract more investors, which will improve liquidity and transparency in the market, the report explained.

The ETF was the result of the collaboration between Albilad Capital and Dubai Gold and Commodities Exchange (DGCX).

Furthermore, the report, citing the Ministry of Industry and Mineral Resources, indicated that the contribution of the mining sector to GDP in the Kingdom is expected to exceed SR 240 billion, reduce imports by SR 37 billion and offer more than 200,000 opportunities. direct and indirect jobs by 2030. The report noted that despite this, the financial market for gold is still in its infancy.

The report was jointly prepared by Deloitte and the International Sharia Research Academy for Islamic Finance (ISRA), which examined the opportunities for the gold market after the Covid-19 pandemic.

"Predominant feeling [..] demonstrates confidence in gold as a strategic asset and makes it a viable product around which to design Shariah-based products, "the report said. It also added that gold has emerged as a stable and safe investment after the effects of adverse events of the pandemic and the financial crisis that followed.

This has led the two organizations to produce a report that explores the gold market, in particular to examine it through a Shariah-compliant lens. This comes after the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) issued the Shariah Standard on gold and its trade controls in 2016.

Sixty percent of respondents, which was conducted as part of the report analysis, thought that the introduction of the aforementioned Standard would create more opportunities to develop Shariah-compliant investment options.

The precious metal, historically considered a "durable and reliable asset class," has a characteristic that is missing from fiat money today, according to the new joint report. In times of crisis, the fiat money-based monetary system "is affected by the creation of money generated by debt." The money supply is reduced due to the reluctance to take on new debts, which leads to a slowdown in the circulation of money. What follows is a cycle of weaker demand and production.

Gold, on the other hand, provides the stability that investors so badly need.

However, gold still has its own challenges. There are social and environmental concerns about its mining and trading processes. Workers in African mining companies are at high occupational risk. Reserves are also being depleted as stakeholders spend less and production costs and capital expenditures are increasing.