Sunday, August 31, 2008

Shariah Compliant Gold and Silver ETF

In London recently, ETF Securities (ETFS) launched what is claimed to be, the world's first Shariah Compliant precious metal exchange-traded commodity, (ETC) based on physical platinum, palladium, silver, gold and a basket of the above metals.

According to Meralli, formerly with Goldman Sachs and Deutsche Bank, an Exchange Traded Commodity (ETC) is very similar to an ETF (exchange-traded fund). However, it is a security structure not a fund. "Conceptually, an ETC offers investors a simple, efficient and cost-effective way to access commodities via a priced security listed on a regulated exchange. ETCs trade and settle the same as equities. ETCs are open-ended and can be created and redeemed to demand. ETCs are simple to access as they are traded in three currencies (euros, US dollars and sterling)." he explained.

"In Shariah, the common issue of a commodity Murabaha contract is that it cannot feasibly be structured for gold and silver. With the ETFS physical precious metals ETCs, the nominate transaction is an entirely different structure. In purchasing the security, the investor obtains an allocated physical entitlement to the underlying bullion and his return is tied directly to the spot price of that precious metal less the management fee." he stated.

This appears to be ETFS answer to entering the multi billion dollar Islamic finance and Sameer Meralli, head of sales for Middle East and North Africa at ETF Securities, then stated, "... they are a purer form of Islamic commodity transactions, for instance compared with Murabaha (cost-plus financing). In an ETC, investors do not have to worry about margins, delivery or the underlying assets."

What makes the ETC Shariah complaint is that, according to ETF Securities, all of the physical precious metal ETCs are backed by allocated metal - uniquely identifiable bars and ingots which carry no bank credit risk. The bars and ingots are held in trust in London by custodian HSBC Bank NA (USA), the leading custodian for ETCs in the world. Unlike the usual gold Exchange Traded Fund (ETF) where one is betting on the value of the fund going up and the fund is not directly related to specific bars of precious metal, gold in this case.

The precious metals conform to the rules of good delivery of the London Bullion Market Association (LBMA) and the London Platinum Palladium Market (LPPM) and securities are only issued once the metal is confirmed as being deposited into the company's bullion account with the custodian. Also consistent with allocated gold, no precious metal is borrowed, loaned out and nor does it earn any income.

This then is an assurance for the Islamic investor that his or her holding is actually precious metal in the form of gold rather than an account reflecting the price of gold and interest is not earned on the precious metal but one is relying on the value of gold moving up in order to recoup ones investment is necessary to ensure that one is Shariah complaint and not violating the law with regard to usury or riba as it is called in Islamic law.

The five ETCs that are Shariah-approved are specifically the ETFS physical precious metals products - the ETFS physical gold, ETFS physical silver, ETFS physical palladium, ETFS physical platinum, and the ETFS physical precious metals basket (an aggregation of the four precious metals). Each of these securities, said Meralli, are backed by physical allocated metal held by the custodian. These are designed to track the spot price of the underlying physical bullion less the management fee.

Meralli also explained, "Three weeks ago, after an extensive approval process, the Shariah Advisory Board at Al-Qalam Group approved the product as being fully Shariah-compliant. Since the security is backed by physical allocated bullion, which is held in trust on behalf of the security holder, the underlying transaction enables investors to obtain a spot return on the basis of a precious metal that they actually hold (in a vault in London or Zurich to be exact). The logistics of this transaction are in pure concordance with Shariah financial tenets,"

Also Shariah Complaint and where stability and security is paramount and where one can monitor the existence of the precious metals such as gold and silver, one could be better off looking at buying gold and silver from such places as rather than as an ETC.

In this case there is no interest or riba and it is a safe and secure way to hold assets and not lose value due to inflation and other reverse interest penalties. besides which one can now take delivery of the gold in the form of 1000 gram gold bullion if one wants to. This makes GoldMoney a great safe haven for storing gold.

Friday, August 08, 2008

Gold Medals at the Olympics

With all the attention right now on the Beijing Olympics some have asked what the Olympic gold medals are made of and who makes them.

The Olympic Medals are a symbol of the utmost achievement in sport and of course this is represented by none other than Olympic Gold Medals.

According to legend, the ancient Olympic Games were founded by Heracles, one of the sons of Zeus. And the first Olympic Games, for which we still have written records, were held in 776 BC. At this Olympic Games, a naked runner by the name of Coroebus, a cook from Elis, won the sole event at the Olympics. The stade (from which the word Stadium comes) - a run of 192 meters or 210 yards. This made Coroebus the very first Olympic champion in history.

Medals were first introduced in 1896. Winners received a silver medal, the second place received a bronze medal, the third none at all. Then, in 1900, most winners just received cups or trophies instead of medals.

The IOC has since retroactively assigned gold, silver and bronze medals to the three best placed athletes in each event to fit in with more recent traditions.

Most gold medals are actually gold-plated with notable exceptions, made of solid gold, being the Lorentz Medal, the United States Congressional Gold Medal of Honor and the Nobel Prize medal. The last Olympic gold medals that were made entirely out of gold were awarded in 1912.

The Olympic medals are designed especially for each individual Olympic Games by the host city's organizing committee. Each medal must be at least three millimeters thick and 60 millimeters in diameter. Also, the gold and silver Olympic medals must be made out of 92.5 percent silver, with the gold medal covered in six grams of gold.

The concept of the sequence of medals being gold, silver and bronze for the first three places dates from the 1904 games and has since been adopted by many other sporting events.

Minting of the medals is always the responsibility of the host city.

From 1928-1968 the design has always been the same. The obverse showed a generic design by Florentine artist Giuseppe Cassioli with text giving the host city and the reverse showed another generic design of an Olympic champion.

From 1972-2000, Cassioli's design, sometimes slightly changed remained on the obverse but now with a custom design by the host city on the reverse. Note that Cassioli's design showed a Roman amphitheater for what were originally Greek games and a new obverse design was commissioned for the Athens 2004 Games. Winter Olympics medals have been of more varied design. The silver and bronze medals have always borne the same designs.

So over the coming weeks we will watch with wonder as the athletics of the day perform their very best in order to obtain that most treasured of possessions, An Olympic Gold Medal.