Potential boon to Islamic gold funds as industry players anticipate continued rise in gold, silver prices

The global Islamic funds landscape is skewed to gold holdings, with the IFN Investor Funds Database tracking a total AuM of US$138.96 billion as at the 8^th September 2025 – more than twice the next asset class aggregate of US$59.97 billion in Shariah compliant equities.

This trend will stay as global prices for gold and silver – which are among the precious assets preferred by Islamic investors – surpassed the respective US$3,500 and US$40 per ounce marks by early September 2025. Industry experts forecast this upward trend may well continue into 2026.

Also in H1 2025, the IFN Investor Funds Database showed Islamic commodity funds – with largely gold holdings – in the Middle East posting a remarkable 74.16% increase in AuM, while the Asia Pacific region grew by 46.57%.

The main driving factor seems to be US-triggered tariff uncertainties imposed by the Trump administration and anticipation of US rate cuts, with Morgan Stanley projecting that the price of gold may hit US$3,800 by this year-end while Goldman Sachs sees it reaching US$4,000 by the middle of 2026.

Goldstrom Executive Director Patrick Tuohy, a Singapore-based global gold trader, told IFN Investor that gold prices can also be viewed as having an inverse correlation to the US dollar falling in value, because “the US dollar is no longer a financial reserve asset. It's a [trade] weapon”.

Citing figures from the World Gold Council, Patrick noted that gold holdings overtook the euro as a reserve asset by June 2025 and had since then also surpassed US Treasuries. “Senior bankers in Hong Kong have said China doesn't want the renminbi to be the world’s next reserve currency, they see gold filling that role.”

This economic policy stance has had a knock-on effect, with China already taking precautionary steps by instructing its domestic insurance firms and pension funds to hold physical gold in place of US Treasuries for asset value preservation.

“If the US dollar value keeps going down, together with US Treasuries, over the next 10 years, that is going to have an impact on the value of significant asset holdings. That, in turn, impacts how people who have their long-term savings locked, and also insurance companies, will meet future dues.”

This trend is also being charted worldwide, said Patrick. “In terms of the daily volume of gold traded globally, if you add both the physical and derivatives, at commodity and futures exchanges, gold actually trades at three times the daily volume of the ‘Magnificent 7’ tech stocks.”

Additionally, the average European central bank is reportedly now holding around 15-18% of reserves in physical gold, while the average for emerging market central banks is only 1-2% in gold. “So, there's an enormous catch up buying likely,” said Patrick, noting such significant gold demand is also influencing the rise in silver prices.

Citing the historical trend over the past few decades, where the typical ratio saw 65 ounces of silver equating to an ounce of gold, Patrick said the current gold price should be reflected with silver priced at US$52 per ounce and projected this reaching US$60 by the end of 2025.

Meanwhile, Alpha Binwani Capital Founding CEO Ashwin Binwani, who manages gold and precious metal investment funds, told IFN Investor that tariff pressures on global currencies are causing too much uncertainty in asset valuations and fund returns – leading to a more pronounced flight to safety by investors into physical gold.

With continued concerns over the global economy, Ashwin said among solutions being discussed by policymakers is whether there should be a return to a gold-backed currency – a system that ended when the US suspended gold convertibility to the dollar in 1971.

Beyond promoting financial stability, “being fully asset-backed keeps the currency free from speculation. It fosters transparency and responsibility, responsible stewardship of wealth. Such an alignment is very important for religious people, especially Shariah investors.”

Acknowledging such a development may not come to pass anytime soon, Ashwin said the long-held trust in gold as a value preservation tool in current global economic uncertainties will support rising prices for gold and the related precious metal of silver.