Is gold trading halal in Islam? Since 570-546 BC, gold and silver have been used as a medium of exchange before the emergence of Islam. Unlike currencies, gold is not susceptible to the whims of government and central banks as currencies are. Fiscal or monetary policies do not affect gold prices. Gold will always be worth something, unlike currency that might be nearly worthless due to uncontrolled inflation. Over the years, there has been an increasing trend in gold investment, particularly among new investors.
Gold trading is permissible (halal) in Islam. But, before trading the gold, every Muslim should know that gold is one of the Ribawi items. It means Muslims cannot trade it for future profit or speculation. However, Muslims are allowed to use gold as a form of cash and own it as jewellery. Whether Muslims can exchange gold as a commodity has long been a topic of contention among Islamic scholars.
Amongst the well-known authentic hadiths of Prophet Muhammad S.A.W. about Ribawi items and Riba Al buyu’ is :
قال رسول الله صلى الله عليه وسلم : الذهب بالذهب والفضة بالفضة والبر بالبر والشعير بالشعير والتمر بالتمر والملح بالملح مثلا بمثل، سواء بسواء، يدا بيد، فمن زاد أو استزاد فقد أربى. رواه مسلم
The Prophet S.A.W. said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt – like for like, equal for equal, and hand-to-hand; if these goods differ, then you may sell as you wish, provided that the exchange is hand-to-hand.”
Scholars have agreed that the exchange of gold for gold, silver for silver, and wheat for wheat must fall under two requirements:
1) They must be of equal worth and weight.
2) Cash payment, or on the spot basis.
Although gold trading in Islam is permissible (Halal), Riba on gold can happen in two situations. First, the deferment in the delivery. Second, the deferment in the payment. Therefore, to avoid riba, the transaction must be completed on the spot.
Here are some suggestions to avoid Riba in the gold transaction:
– Buying physical gold (gold bar, gold coin, or jewellery) in cash and on the spot basis.
–Use the acceptable method of payment such as cash, banker’s check, debit or credit account, and Shariah-compliant credit card.
–The buyer or the agent must make the delivery of the gold on the spot or on a cash basis.
–Hire an agent to purchase the gold. The buyer may choose anyone to make the selling contract and qabad on his or her behalf. For example, Islamic banks that engage with gold trading and firms or individuals that actively trade gold can be nominated as agents on behalf of their customers. It can also help with online gold trading concerns. As long as the agent does not conduct the transaction on a deferred basis, this is acceptable.
–Consignment approach, in which the seller acts as an agent to a supplier to sell the gold. The consignee (the seller) can sell the gold directly to the buyer or his agent as a representative. Furthermore, the consignee has the option of purchasing the gold from the consignor before selling it to the client, with payment made by debit or credit to the consignor’s account.
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