RELATIONSHIP

BETWEEN
GOLD/GOLD
DINAR &
ECONOMIC
CONDITION
CHE SURIATY DISA (815226)

HANIS HAZWANI AHMAD (817801)

SITI KHADIJAH SALEH (818578)
SITI NOOR ADNAN (817481)

RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

INTRODUCTION
Our former Prime Minister Dr. Mahathir Mohamad was
first expressed his interest in Gold Dinar currency after
Malaysia and other Asian countries were attack by the
speculators in year 1997, which leads to financial crisis.
Tun Dr. Mahathir Mohamad suggested that, Gold Dinar
currency could be used to help uniting Muslim countries
due to the fact that, the value of the Gold Dinar currency
has remained stable in relation to basic consumable
goods. Therefore, it shows that Gold Dinar value is stable
over time (Mahathir, 2003).
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

He wants to use the Islamic Gold Dinar in place

of the American dollar for overseas trade
settlements.
Therefore, Gold Dinar in international trade is
seen as a strategic move to protect the interest
of nations as far as monetary stability,
independence and justice are concerned.
(Siti Zaiton & Nurshuhaida, 2013)
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

WHY USE GOLD DINAR?

An alternative system to fiat

money whereby the value of
currency is Gold value rather than
paper note.
The implementation and usage
gold dinar give more value added
as opposed to fiat money
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

CONT.
The of gold as a currency and financial
instrument it leads us to follow the way of
Islamic society in the past.
They establish the usage of fiat money such
as paper money to change the system of
gold dinar after the Khalifah system collapse.
(Malaysia Economist Blog)
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

Advantage of Gold Dinar

It has intrinsic value

It leads to harmonization in
currency system that people
cannot make injustice for the
usage of it
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

CONT.
Inflation maybe happened in natural
way
It can solve the problem of
overproduction in printing money. Do
not lead to discrimination
The value gold of stable.

(Malaysian Economist Blog)

RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

Relationship of Gold Dinar

with Price Currency
1.Price stability
Used to measure the value of a local
currency
Eg: if there is high demand from
industry requires gold for production.
This will cause gold price rise.
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

Price Stability

According to mahmood (2001), the practice of

muslim states in the first centuries of islam
confirm that a true and acceptable monetary
unit is that which has a stable worth due to
the intrinsic value of the metal it is made of.
History has shown that the gold price shown
stable and fit to be money and there is no
money more unfit than paper money.
(MAHMOOD, 2001)

RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

Cont.
Regarding the price stability, history has proven that the movement of
the price of gold is more stable than fluctuations in the value of fiat
money
For example, when the ringgit fell by 43 per cent to the US dollar, this
would be a good illustration of how fluctuations in fiat money can
affect trade.
Even though the low ringgit was attractive for the export market, the
fact remains that the country's import bill climbed substantially. This
condition had an indelible impact on Malaysia's economic
development.
(Source: Saifuddeen Shaikh Mohd Salleh,New Strait Times )

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CONT.
2.Import and Export
Effect countries that impact and
export
Eg: Import > Export = Currency
Import & export using Gold =
Strenght in currency.
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CONT.
3. Inverse Relationship between US Dollar and Gold
Dinar

The freeing of the US dollar from the gold standard

has enabled it to fluctuate more widely while the
value of the gold remains stable, making it a safe
for investors in times of uncertainty, as a hedge
against inflation and recession.
The value of the gold remains stable in comparison
to currencies, but its price in any given currency
can fluctuate as the perceived value of that
currency changes.
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CONT.
The fluctuations in its price in US dollars reflects
confidence in the currency, as the dollar revalues itself
in relation to gold.
Thus, the price of goldtends to move in opposite
directions to the value of the US dollar.
The history of the US dollars association with gold can
be useful, in order to predict when the inverse
correlation is most likely to be triggered and how this
can be used to ones own advantage when investing.
(http://www.kitco.com)
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

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Gold Investment
Investors generally buy gold as a way of diversifying
risk
Traditional way of investing in gold is by buying gold
bars such as in a country likeCanada,Austria,
LiechtensteinandSwitzerland, these can easily be bought
or sold at the major banks.
Banks in Malaysia offer gold investment accounts to
customers who will make deposits when prices of gold are
low and withdraw at a profit when prices rise

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Impact on Economic
Condition
Investing in Gold will spread the risk in a country that control the economy
Investment in gold guarantees value and provides security (Zuhaimy
Ismail, 2003)
Investment in Gold will contribute to economic growth.
Investing in Gold mean turn the currency into gold bars may protect you
from the devaluation of currencies.
But investment in gold may affected by the political risk that states to
a situation where the government make alterations laws and regulations or
its usage as currency.
For example: In 2005 Chavez, the Venezuelan president announced the
confiscation of the property held by Crystallex, a Toronto-based goldmining company.This resulted in a drop of its share price by 50 per cent in
a single day.
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PROBLEM SITUATION
Paper money quantity can be increased
since there will always be demands
from the public to increase the quantity
of money which would cause inflation =
manipulation of paper money
Floating rate exchange is the currency
rate that is unstable which can be easily
fluctuating
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Solution : How can Dinar

help in Economic Crisis
The gold prices are indeed relatively stable compared
to other commodity prices, exchange rate movement
and the stock market index
Manipulation of currencies and the impact
toward one economy could be reduced because
of the fact that gold does not inflate in value as
it is a commodity and thus has an intrinsic
value
If gold coin were used, then counterfeiting would also
be checked
RELATIONSHIP GOLD DINAR AND ECONOMIC CONDITION

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CONT.
With dinar and elimination of interest, we would
have a stable currency and monetary system,
money supply growth (from new discoveries of
gold) can be expected not to exceed growth in
the real sector, thus eliminating the inflationary
pressure in the economy
If all these exchange rates are eliminated by means of
a single currency like the dinar, then speculation,
arbitrage and manipulation will be very much removed
if not eliminated

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Can Gold Dinar solve the

trade problem among the
countries?
Islamic
Organization
of Islamic Conference (OIC)
International organization grouping to pool their
resource together, combine their effort and speak
with one voice to safeguards progress and well
being of their people and all Muslims in the world

The successful implementation of the Islamic

Gold Dinar is the level of acceptance among
OIC members
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CONT.
The Gold Dinar could be an important
facilitating mechanism to help the
smaller countries of the world move
away from an inherently unstable and
ultimately unjust global monetary
system, (Minews, 2002).

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CHALLENGE
Gold as means of exchange has encountered a
number of challenges right from its beginning
until the late 20th century when its circulation
as was finally prohibited by the World Bank.
The recent re-introduction/re-invention of gold
dinar (money) in Kelantan comes with its own
challenges with protests against its adoption as
an alternative currency.
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Issues
Kelantan Gold Dinar (DEK)
Benefit from the advantages of gold
dinar in various forms of activities
such as reserves, investments, zakat
payments, jewelry and wedding dowry.
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CONT.
Kelantan is the first state in Malaysia to
accept zakat payment in gold dinar form.
Gold dinar as a wedding dowry has also
been practiced by some community in
Malaysia. In 2001 Malaysian artists M Nasir
and Marlia Musa became the first couple to
gold dinar as their wedding dowry (Utusan
Malaysia, 2001).
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CONCLUSION
Most central bank around the world
invest more in gold to preserve their
assets during volatile economics
conditions especially for Islamic
countries.
Gold Dinar is an alternative to control
and protect economic crisis because of
its own characteristic.
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