Subject : Some Rulings on Trading with Gold
Fatwa Number : 3303
Date : 06-07-2017
Classified : Usury (interest) &Loans
Fatwa Type : Search Fatawaa

Question :

What is the ruling on selling and purchasing gold along with mentioning the regulations governing that?

The Answer :

All perfect praise be to Allah, The Lord of The Worlds, and may His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Islam has placed severe restrictions on selling usurious kinds in a bid to maintain the stability of currency, and various transactions as well as warding off great harms resulting from Riba(usury/interest). Ubida b. al-Simit (Allah be pleased with him) reported Allah's Messenger (PBUH) as saying: "Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand."{Muslim}.

Therefore, it is permissible to pay for gold by gold under the condition that they are of equal weight and the exchange is made on the spot.

As for paying for gold by currency, it is only conditioned that the exchange is made on the spot. Restrictions that govern trading in gold are as follows:

First: It isn`t permissible to pay for advanced gold by deferred gold to avoid delay usury. Abu Salid al-Khudri reported Allah's Messenger (PBUH) as saying: "Do not sell gold for gold, except like for like, and don't increase something of it upon something; and don't sell silver unless like for like, and don't increase something of it upon something, and do not sell for ready money something to be given later."{Related by Bukhari and Muslim}.

Second: What counts is equality in the actual weight of the pure gold being exchanged, and not quality, use or goldsmithery, in general, because equality in weight is a condition stipulated by Sharia-evidence which gave no importance to details that cause difference in value. Al-Imam Al-Subkhi said: "From the perspective of Sharia, what counts is the weight of the gold, not its quality."{Al-Majmou` Shareh Al-Mohazab, 10/70}. Accordingly, it isn`t permissible to sell used gold for new gold except of equal weight, and there is no significance for the difference in karat when selling gold for gold of equal weight. This means that it is valid to sell new gold for used gold of equal weight and to sell 24 karat for 18 karat if the weight of the pure gold is equal.

\Third: Adding the value of the gold, that is normally lost in the formation process, to the percentage of gold present in the pure gold is an act of deception forbidden in Sharia. However, if that is the custom observed among gold traders then there is no harm in it provided that the formed item is sold for currency and the buyer is told about that because what counts is the actual weight of the pure gold.

Fourth: It isn`t permissible to sell the gold item which contains a stone for gold to avoid the suspicion of Riba for Fadila b. 'Ubaid (Allah be pleased with him) reported: " I bought on the day (of the Victory of Khaibar) a necklace for twelve dinars (gold coins). It was made of gold studded with gems. I separated (gold from gems) in it, and found (gold) of more (worth) than twelve dinars. I made a mention of it to Allah's Apostle (PBUH), whereupon he said: It should not be sold unless it is separated."{Muslim}. However, had that item been sold for currency, it would have been permissible.

Fifth: If the customer requested installing a stone on a certain gold item, it isn`t permissible to make him pay for it based on the weight of the gold prior to formation since it is considered an act of deception. However, it is permissible that the goldsmith sells the gold before its formation then reach an understanding with the customer to form that gold in return for a fee, provided that the latter is informed about the weight which will be lost after the formation process. And Allah knows best.



Warning: this window is not dedicated to receive religious questions, but to comment on topics published for the benefit of the site administrators—and not for publication. We are pleased to receive religious questions in the section "Send Your Question". So we apologize to readers for not answering any questions through this window of "Comments" for the sake of work organization. Thank you.