English
Gold is one of the six ribawi items, alongside silver, dates, barley, salt, and wheat, as mentioned in the hadith of Ubadah bin al-Samit (R.A). The Prophet Muhammad (S.A.W) said:
"Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt—same amount for the same, equal quantity for equal, hand-to-hand. If these types differ, trade as you wish, but do not delay the exchange."
The term ribawi refers to transactions involving these six commodities, which contain elements of riba (usury), strictly prohibited in Islam.
There are two main types of riba:
1- Riba al-Nasiah (also known as Riba al-Quran): This occurs when an increase in payment is required due to a delay or postponement in settling a debt.
2- Riba al-Fadl (also known as Riba al-Hadith): This occurs in the exchange of similar or different ribawi items when there is an imbalance in quantity or an absence of an immediate hand-to-hand exchange, as mentioned in the hadith above.
Both forms of riba are strictly prohibited in Islamic finance to ensure fairness and prevent exploitation in trade and financial transactions.
If gold is exchanged for gold, silver, or currency, the counter-value must be delivered during the contracting session, with actual or constructive possession taking place.
However, if gold is exchanged for items other than gold, silver, or currency, the deferment of one of the counter-values is permissible.
From a Shariah perspective, it is impermissible to make a sale contract contingent upon the occurrence of a future event or to link it to a future contract. Similarly, the stipulation of Khiyar al-Shart (cooling-off option) in such transactions is not allowed.
Additionally, it is not permissible to defer the delivery of both counter-values in a gold sale, as this would violate the Shariah requirement that both counter-values be exchanged within the transaction.
Read more about: Understanding The Concept of Possession in Islamic Jurisprudence
Yes, buying gold on credit violates Islamic principles. According to Shariah, the sale of gold follows a key principle: if gold is exchanged for gold, silver, or currency, both counter-values must be exchanged immediately.
Purchasing gold on credit violates this principle, as possession occurs for only one counter-value while the other is deferred, making the transaction impermissible in Islamic finance.
If gold is exchanged for gold (in equal quantity) or sold for silver or currency (not necessary in equal quantity), a valid transaction under Shariah requires that both counter-values be exchanged immediately within the contracting session.
This means the transaction must occur on the spot, with both parties taking possession.
Selling gold on credit violates this principle, as possession of one counter-value is deferred, making the transaction Shariah-impermissible.
Buying gold with a credit, charge, or debit card is permissible if the payment is deducted at the time of the contracting session. According to AAOIFI Shariah Standard No. 2:
"It is permissible to purchase gold, silver, or currency with a debit or charge card if the issuing institution can settle the amount due to the seller without any delay."
For further details, please refer to AAOIFI Shariah Standard No. 2
Read more about: Are Credit Cards Halal to Use?
From a Shariah perspective, charging interest on delayed payments in any transaction, including the purchase of gold, is impermissible. This is due to the element of usury (riba al-nasiah), which is strictly prohibited in various verses of the Holy Quran and Hadith.
Online buying and selling of gold are permissible under Shariah if both payment and possession occur immediately. Possession can be either actual or constructive.
Constructive possession is established when:
1- The gold is allocated to the buyer.
2- The buyer is given the right to dispose of it.
3- A certificate is issued, representing a specific quantity and quality of gold.
However, purchasing unspecified gold is impermissible from a Shariah perspective.
For more detail, please refer to the AAOIFI Shariah standard
Buying digital gold is permissible if it is physically backed, payment is made immediately at the time of the contract, and possession is taken either physically or constructively.
Gold falls under Bai' al-Sarf (currency exchange transactions), which requires that both counter-values be exchanged immediately within the contracting session.
In the case of buying gold on instalments, the possession of the counter-value (payment) is deferred, violating this condition. As a result, such a transaction is considered Shariah non-compliant.
Investment in Gold ETFs or gold-backed stocks is considered Shariah-compliant if structured in accordance with Islamic principles governing the sale and purchase of gold.
For compliance, the following conditions must be met:
- Gold must be physically backed and allocated to the transaction.
- Offer and acceptance must occur within the contracting session.
- Fullpayment must be made immediately.
- Possession (actual or constructive) must be taken within the same session.
If any of these conditions are not met, the contract will be considered Shariah non-compliant.
References:
https://aaoifi.com/ss-38-online-financial-dealings/?lang=en
https://aaoifi.com/ss-57-the-gold-standard/?lang=en
https://aaoifi.com/ss-2-debit-card-charge-card-and-credit-card/?lang=en
Lateh, N., Osman, M. R., Universiti Teknologi, M. A. R. A., & Rejab, S. N. M. (2018). IMPLICATION OF THE DETERMINATION FOR THE GOLD RIBAWI'ILLAH (CAUSE) TOWARDS FIAT MONEY IN ISLAM. The Turkish Online Journal of Design, Art and Communication.
Disclamer:
This post is for educational purposes only, and the Firm does not directly or indirectly provide these services.
