Singapore Exchange (SGX) on December 19 announced the launch of the world’s first Shariah-compliant gold futures, called Singapore kilobar gold contract, which is envisaged to drive innovation in Islamic investment products.

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. The contract is now certified by Amanie Advisors, a leading advisory firm specializing 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).

William Chin, head of metals and bulk commodities at SGX, says the contract unlocks a new investment and risk management option for the rapidly growing Islamic finance industry estimated to hold about US$2 trillion in assets. It also strengthens Singapore’s position as an international centre for Islamic finance, and builds on SGX vision to develop a global trading hub for gold.

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