Written by Haider Saleem
Financial and Political Analyst | LinkedIn / X

Date: April 29, 2025

Amid rising market volatility, gold has once again surged into the spotlight. 

For Muslim investors looking to protect their capital, gold appears attractive. 

But is it the right choice for a halal portfolio today? This article explores:

1. Current market trends

2. Pros of gold

3. Cons of gold

4. How it compares to other defensive assets

5. How gold has historically performed during crises

 What the Market Is Telling Us

The financial markets have been shaken in recent months. 

The April 2025 sell-off –  following the U.S. administration’s 10% blanket tariffs and a 145% duty on Chinese imports – wiped out over $5 trillion from global equities. 

During this period, traditional defensive assets like bonds and certain stocks saw losses, while gold rallied above $3,000 per ounce. Currency-hedged gold ETFs, such as iShares Physical Gold Hedged (IGLG), returned over 30% over the past 12 months, outperforming many other asset classes during the same period.

This performance has sparked renewed interest in gold among retail and institutional investors.

The Case For Gold

1. Portfolio Diversification

Gold tends to behave differently from traditional financial assets. When stocks decline or currencies weaken, gold often maintains or increases its value, helping to stabilize portfolios.

2. Inflation Hedge

In environments of rising prices, gold’s purchasing power tends to hold firm. This makes it a valuable hedge, especially when fiat currencies lose value.

3. Shariah Compliance (When Structured Correctly)

Gold is considered halal when bought in physical form or via ETFs backed by actual gold holdings. It avoids riba (interest) and gharar (speculation) when ownership is immediate and verifiable.

4. Global Demand and Liquidity

Central banks, sovereign wealth funds, and individual investors continue to accumulate gold. Its liquidity and universal recognition make it accessible, even in times of crisis.

The Case Against Gold

1. No Yield or Dividends

Gold does not generate income. Unlike sukuk or dividend-paying stocks, it only provides capital appreciation when prices rise.

2. Storage and Transaction Costs

Physical gold requires secure storage and insurance, while ETFs carry management fees. Premiums on coins and bars can be significant.

3. Short-Term Volatility

Despite its long-term appeal, gold prices can fluctuate significantly in the short term. In panicked sell-offs, investors may liquidate gold to cover losses elsewhere.

4. Currency Risk

Because gold is priced in U.S. dollars, investors outside the dollar zone can face losses if their home currency strengthens. Currency-hedged ETFs, designed to protect against volatility of currency exchange rate volatility, can help, but they come with added cost and complexity.

How Does Gold Compare to Other Halal Defensive Assets?

Sukuk

Offer predictable, Shariah-compliant income and are backed by tangible assets. While considered lower-risk, their values can fluctuate if interest rates rise globally, which may indirectly influence investor demand.

Low-Volatility Stocks

These are shares of companies in stable sectors like utilities, healthcare, and consumer goods. They tend to experience less dramatic price swings and are often favored during downturns. However, as equities, they still carry inherent market risk and are more volatile than fixed-income products like sukuk.

Cash and Money Market Funds

These assets prioritize capital preservation and provide liquidity, making them ideal for uncertain periods. Stable but low-returning, they are useful for liquidity rather than growth. While very low-risk, they offer minimal returns and may lag behind inflation over time.

What History Tells Us About Gold in Times of Crisis

Gold has a long-standing reputation as a safe-haven asset, particularly during periods of financial stress and uncertainty. Historical data shows several key periods where gold either preserved or grew in value while traditional markets faltered:

2008 Global Financial Crisis

As equity markets collapsed, gold surged from around $700 to over $1,000 per ounce by early 2009. Investors sought refuge from collapsing banks and volatile currencies.

2020 COVID-19 Pandemic

Amid lockdowns and global recession fears, gold peaked above $2,060 in August 2020. This represented a ~30% gain over 12 months, outperforming most major asset classes.

2025 Tariff Shock

Following the April 2025 announcement of 10% blanket tariffs and 145% duties on Chinese imports, global stocks lost over $5 trillion in value. In contrast, gold surged above $3,000 per ounce, with currency-hedged ETFs like iShares Physical Gold Hedged (IGLG) returning over 30% over the past 12 months.

So, Should You Add Gold to Your Portfolio?

Gold offers unique defensive qualities and Shariah compliance. It may preserve wealth during uncertainty and diversify risk across assets. 

But, it is not without trade-offs: lack of income, storage concerns, and occasional volatility mean it works best as a supporting role rather than the foundation of a portfolio.

Experts typically suggest an allocation of 5–10%, depending on individual risk appetite and market outlook.

Final Thought

In 2025’s uncertain environment, gold may not be a silver bullet, but it can be a valuable ally, especially when diversifying your portfolio.

Disclaimer: The content is for informational purposes only and does not constitute legal, investment or financial advice.
It is important to conduct your own research or consult with a financial or investment advisor. Past performance is not indicative of future results. All logos or brands are referenced for identification purposes only and do not constitute an endorsement of any kind. This information is accurate as of the date of publication and may not reflect recent changes. Access our comprehensive legal disclaimers at https://musaffa.com/disclaimer.