Most of the times best results are based on very simple strategies. The more complicated an investment strategy the smaller usually the output. Straight and simple investments are definitively preferable over too sophisticated ones. After all it is easier to understand where your money goes in.  

Gold Dinar

Take as a counterexample all the financial investment products like Subprime Mortgage Vehicles, CDO (Collaterized Debt Obligations),... etc. These are highly complicated artificial finance products nobody really understands and that was the reason why the financial markets collapsed in September 2008. That is one of the reasons why there is discussion whether financial derivatives are really qualified for Islamic Finance. Here again the principle of simplicity applies: The easier to understand the underlying principle of investment the easier to see if it is Shariah compliant or not. One of the simplest investments is physical gold. You just browse a few shops for the best deal and buy it. You remember our previous article about Islamic Gold Investment in September 2009? Back then gold was at 950 US$/oz. Now we are at 1.500 US$/oz. That's a surge of almost 60 % in 1^1/2 years. Is it a gold bubble? Maybe the rise was too fast and it will correct. Who knows! But the underlying fundamentals still look bullish for gold. Just look at the overall situation of many important economies worldwide.

Gold Price Chart as of 28.04.2011 (Source: http://www.regalgoldcoins.com/gold-price-chart.html)

The USA, Japan or Europe, just to name a few, all of them are highly indebted and can not repay their debts anymore. What they do to solve that issue is to print money. The USA call it Quantitative Easing (QE). There have already been 2 QE and it looks as a 3rd one is due to come in June. Printing money without having underlying assets will unavoidably result in inflation. Standard & Poors, one of the big rating agencies, only recently placed a negative outlook for the US economy. Renowned economists like Marc Faber - publisher of the Gloom Boom Doom report - predict a hyperinflation for the USA and a fall of the US Dollar to it's intrinsic value, meaning that it is worth only the paper it is printed on.

In such a case it is questionable if it is a good investment to lend money to governments by buying bonds. Hardliners see bonds as non Shariah-compliant as it is only a promise of payment given by a government or company. However this would lead us too far. And in reality Sukuks (Islamic Bonds) are certified by Islamic Scholars to comply with Shariah law and are common standard nowadays.

To invest in physical gold causes no headaches at all. Gold is an asset and no one's liability, therefore perfectly Shariah compliant. And in the unlikely event that governments and markets are crashing down and paper money will lose value you are still on the safe side with your gold.

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