30
May
2017

Why Sharia Gold and Bitcoin Point to a Change in Views

  • New gold-backed currency OneGram launched
  • Backed by one-gram of gold, uses blockchain technology
  • OneGram is first in wave of new Shariah, tech-savvy gold products
  • 2017 sees big changes for gold thanks to Shariah gold and blockchain
  • Gold investors should prepare for tightening in supply
  • Bitcoin and shariah gold demand suggest change in retail investor thinking

Technology, shariah gold and bitcoin point to changing views

Ramadan Kareem rang out across Dubai and the rest of the Muslim World this weekend as the holiest month in the Islamic calendar began. For 29-30 days over a billion Muslims around the world practice sawm (fasting), charity (zakat) and salat (prayer). This period is a time of spiritual reflection, increased devotion and worship as well as a time to come together with loved ones for both the break fast meal (Iftar) and pre-fast meal (Suhur).

Ramadan is obviously observed in different ways around the Muslim world. Here in Dubai a non-Muslim will experience a place full of both celebration and reflection, with events happening every evening that are there to welcome everybody. The month also sees a number of companies launching Ramadan promotions ranging from bank accounts (free banking for six months, anyone?) to spa treatments (2-for-1 massage?) to huge packs of dates (the first food to break the fast).

As part of the celebrations, a new gold-backed currency has been launched, here in Dubai. It is a new currency known as OneGram (OGC) backed by one gram of gold and can be used for digital payments. There is a fixed number of OGCs and digital transaction fees (minus admin costs) will be reinvested to buy more gold. According to the managers, “the amount of gold backing each OGC will increase with time.”

OneGram has been launched by a private company of the same name. The company claims to offer a proof-of-stake blockchain that is ‘’further anonymized’ than Bitcoin. Reports state that ‘developers employ zero-knowledge dual-key stealth addresses and ring signature protocols toward ‘instant, untraceable, unlinkable, trustless transactions.’

Shariah Gold Standard

In December we witnessed the launch of the Shariah Gold Standard. Announced in Bahrain by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council, the Standard is the first ever set of guidelines for the 2 billion Muslims looking to invest in gold-based financial products.

As we explained in December:

According to Islamic texts, gold is a ribawi item, which means that it must be sold on weight and measure, and cannot be traded for future value or for speculation. In order for a gold instrument to be Shariah-compliant, the precious metal must be the underlying asset in related transactions.

When the Shariah Gold Standard was launched, one of the world’s leading investors Mark Mobius labelled it as a “godsend” that was both “innovative and revolutionary”. Currently the Islamic Finance market accounts for 1% of the global GDP, and is growing at nearly 20% per year. The new AAOIFI issued guidelines are expected to propel demand for gold as more companies (such as GoldCore) launch Shariah-compliant gold investment products. The combined use of both innovative Shariah gold investment standards and new technology could boost demand by around 500-1000 tonnes per annum.

The launch of OneGram is part of the new wave of gold financial products that we are beginning to see as a result of the Shariah Gold Standard. Muslims have long looked for more gold products to be made available to them in the $2 trillion Islamic financial markets.

A gold-backed cryptocurrency is not just a positive sign for Muslim investors, it is also a positive sign for those who are looking to invest outside of the financial system. Of course, investing in physical gold has long been available for both Muslims and non-Muslims for many years, but this recent announcement says a lot more about the demands for safe-haven investing than previous changes in financial markets have.

A new safe-money standard?

Right now it seems the world is paying attention to a financial and geopolitical situation that is proving to have one too many cracks to fix and fill. But, in the background, there is a growing awareness of how we can protect ourselves when those cracks turn into canyons.

There is something in the air that suggests we might be seeing a turn in the way savers and investors are beginning to view their money. The launch of technologically advanced, shariah compliant gold-products is an early indication of this. But when one also considers the recent performance of bitcoin, then we see that the desire to hold money outside of the financial system with reduced counterparties is growing.

The size of the bitcoin market might be minuscule compared to gold, and gold’s market size minuscule compared to that of the dollar, but times are changing. The increased accessibility to these sound-money, safe-haven assets is a sign that the most powerful financial group in the world – the people on the street – are harnessing ways to gain control of their investment portfolios.

Ultimately we believe bitcoin is a complementary asset to gold, but time will tell. Whilst watching and waiting on bitcoin, gold investors should feel assured that launches of gold-backed products such as OneGram are not only validation of the modern approach to investing in gold, but also validation of their decision to invest in gold.

This is good news for gold investors who have chosen to invest in not only the ultimate form of financial insurance but also one that is finite and physical. As awareness and demand grow, it is not unreasonable to expect to see some tightening in the availability of physical gold, which will have a positive impact on the price.

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Gold Prices (LBMA AM)

30 May: USD 1,262.80, GBP 982.46 & EUR 1,132.23 per ounce
29 May: USD 1,265.00, GBP 983.41 & EUR 1,127.87 per ounce
26 May: USD 1,265.00, GBP 983.41 & EUR 1,127.87 per ounce
25 May: USD 1,257.10, GBP 969.48 & EUR 1,119.57 per ounce
24 May: USD 1,251.35, GBP 963.29 & EUR 1,119.58 per ounce
23 May: USD 1,259.90, GBP 969.62 & EUR 1,119.17 per ounce
22 May: USD 1,255.25, GBP 967.17 & EUR 1,123.07 per ounce

Silver Prices (LBMA)

30 May: USD 17.27, GBP 13.42 & EUR 15.49 per ounce
29 May: USD 17.29, GBP 13.45 & EUR 15.41 per ounce
26 May: USD 17.29, GBP 13.45 & EUR 15.41 per ounce
25 May: USD 17.15, GBP 13.23 & EUR 15.29 per ounce
24 May: USD 17.03, GBP 13.14 & EUR 15.22 per ounce
23 May: USD 17.14, GBP 13.22 & EUR 15.25 per ounce
22 May: USD 16.95, GBP 13.04 & EUR 15.10 per ounce


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  • PeaknikMicki

    ” There is a fixed number of OGCs and digital transaction fees (minus admin costs) will be reinvested to buy more gold. According to the managers, “the amount of gold backing each OGC will increase with time.”
    Question; for every gram purchased how much physical gold is there backing that gram? Given the sharia rule,one would think they need to be transparent up front about exactly how much gold is backing each gram being sold.

    • James White

      how can you claim to be a gold backed cryptocurrency when you won’t even except bitcoin as payment

      • l jess

        bitcoin has no tangible backing and is very volatile – I would not trade gold for bitcoin in that situation either. – put it into a stable form to facilitate your exchange.

        • James White

          bitcoin already rules the roost, it is the number one hottest investment to have by far. gold is going to go up but bitcoin is going to go multiples higher than gold. so you can put 1000 into bitcoin and when it goes to 10k sell half and buy 5 times more gold than you might have had you bought gold instead of bitcoin. there are several places that sell gold for bitcoin.

          • James, be very careful! History is littered with the investor corpses of foolish people who invested purely on the basis of fast capital appreciation. That mind set that leads you to allocate a “small” harmless investment to “a sure thing”, will work sometimes…until it does not and that is when you will have leveraged up for a moon shot return and lose everything. Most bitcoin buyers are speculators, most will lose their shirts. Parabolic price rises in bitcoin actually dissuade owners from exchanging the coins for goods and services and thus decrease its capacity as a medium of exchange, which is its original purpose. Spend your capital and time seeking value and opportunities where you can enhance the formation of capital and return. Stephen

          • That’s assuming that the OneGram IPO doesn’t blow a hole in the bottom of bitcoin value.

          • Their roost is totally virtual.

    • Maybe you should read all of the whitepapers on the OneGram.org website before you start asking questions they transparently answer there.

  • Where can we sign up for this?

  • James White

    hello. onegram does not except bitcoin as payment. so how can a crypto currency function legitimately that doesn’t except crypto currency

    • Give the IPO a chance to get blocks of OneGram into circulation from where it might become available like any other product. Blockchain is what makes it cryptocurrency. It will be interesting to see what will happen to bitcoin when there is a gold-backed competitor.

  • Another sad attempt to get those who only know the buzzword of the day to waste their money. Any sort of backing of a crypto-currency misses the whole point of crypto which is that backing can only introduce third party risk and isn’t needed.

    This is at least the third one of these Ive heard of, none of which has any real value. Gold is physical, crypto is digital. Gold trying to be digital is as dumb as bitcoin trying to be physical.