KSA عربي
KSA عربي
Global عربي
Investment is a growing phenomenon observed in the community. Investors have different financial needs and expectations.
Saving money and investing allows them to earn profit and multiply their capital. Some invest to grow their capital, while others focus on their retirement. However, the main goal of investment is to maximize wealth.
Gold is considered one of the best investments to protect capital during stock market declines and inflation.
In fact, history shows that during inflation, the performance of gold often rises. However, there are also ups and downs in gold prices, which means one can lose investment during a downturn in the gold market.
There are different forms of gold investment, such as jewellery, gold coins, gold bullion bars, ETFs, gold certificates and deposit schemes, e-gold, and gold mutual funds.
Factors to consider when investing in gold include: form of purchase, current income, risk, capital appreciation, convenience, and tax treatment. For more details, please refer to this article written on the India gold investment market.
According to the AAOIFI Shariah standard related to the gold and its trading parameters in Shariah is: “Gold is well-known natural element and precious metal. It is in principle a fungible item and a ribawi commodity, and is subject to the Shariah rulings for the currency exchange.”
Read more about: What Is Commodity Riba - What Are The 6 Ribawi Items?
Gold trading means buying and selling gold to make profit and grow wealth, and takes shape in diverse forms:
1- Physical gold is real gold you own and can keep with you. You have full control over it, with no counterparty risk.
But it needs safe storage, insurance, and has higher buying and selling costs.
2- Paper gold (like ETFs, CFDs, futures) is not real gold in your hand — it’s a document or contract that follows gold’s price. It’s easier and cheaper to trade, but you don’t physically own the metal.
Buying physical gold means purchasing real gold in its metal form and taking actual possession of it. It’s good for long-term investment, but requires secure storage and has higher costs.
Gold ETFs and mutual funds let investors buy shares that track gold’s price. It’s an easy way to trade gold like stocks, without taking physical possession or needing storage.
A gold futures contract is an agreement to buy or sell gold at a fixed price on a future date. It’s useful for hedging and speculation but is riskier and requires trading expertise.
It’s a type of trading where the investor profits from gold price changes without taking physical possession of the gold.
According to the AAOIFI statement related to the sale of the Gold, “The basis for the classification of the gold as a ribawi item is the several prophetic hadith reported on sale, such as the narration from the Ubaida bin al Samit (R.A) that the Prophet (P.B.U.H) said, gold for gold…. Like for like……… and if these kinds differ, then sell as you wish, so long as they are exchanged hand in hand”.
Jurist are unanimous on the Shariah requirements for spot exchange of the counter-values in gold trading, in conformity with the aforementioned Hadith.
In this regard, the International Islamic Fiqh Academy has issued the resolution no. 84. For more detail, Please Check
Here are the reasons why gold trading is impermissible in Islam
If the gold is exchanged with the gold, silver or currency, then it is necessary for the validity of the sale that possession should be taken on both countervalue.
When gold is traded on the basis of paper, trading without physical possession may be permissible if the payment for the gold is received in the contracting session, the gold is physically backed and allocated to the transaction, possession is taken constructively in the contracting session,
the buyer of the gold has the right to dispose of it, and the certificate that represents the gold is distinguishable from others by a serial number or other distinct marks, also enabling the buyer to take physical possession of the gold if needed.
If paper gold is traded with the aforementioned terms, the transaction will be deemed a Shariah-permissible transaction.
From a Shariah perspective, speculation and gambling bot are not allowed in any sale contract including sale of gold.
The factor of Riba occurs in a gold transaction when gold is exchanged for gold and the quantities are not equal, or when gold is exchanged for silver or currencies without immediate (spot) possession. Such a sale will be deemed interest-based financing.
Read more about: Riba Explained: Why It’s Forbidden and How It Differs from Trade?
Gold trading is considered halal if the exchange of gold follows the Shariah rules for gold transactions. The conditions are as follows:
1-If gold is exchanged for gold, both amounts must be equal in quantity, and possession must be taken on the spot.
2-If gold is exchanged for something else, such as silver or currencies, possession of both counter-values must be taken on the spot.
1- What are the rules for buying gold on instalments?
From a Shariah perspective, buying and selling gold on instalments is not permissible due to the lack of immediate possession of the counter-value.
2-Are gold ETFs halal in Islam?
Exchange Traded Funds (ETFs) will be considered halal if it is traded in accordance with the Shariah rules related to sale and purchase of the gold.
The following points should be taken in consideration while trading in gold EFTs:
- When gold is traded on the basis of paper
- Trading without physical possession may be permissible if the payment for the gold is received in the contracting session
-The gold is physically backed and allocated to the transaction
- Possession is taken constructively in the contracting session
- The buyer of the gold has the right to dispose of it
- The certificate that represents the gold is distinguishable from others by a serial number or other distinct marks
- Also enabling the buyer to take physical possession of the gold if needed.
- If paper gold is traded with the aforementioned terms, the transaction will be deemed a Shariah-permissible transaction.
For more detail please refer to the Shariah standard related to the Gold and its trading parameters in Shariah, clause number ¾,
3- Are gold savings plans from banks Shari’ah-compliant?
Gold savings plans from banks will only be Shariah-compliant if it complies with the aforementioned rule related to the sale purchase of the gold.
4- Can I buy gold and pay later?
No, it is not allowed to buy gold now and pay later in Islam. Because gold is the ribawi commodity that should be handed over in the contracting session.
Read more about: Is Buying Gold With Credit Card Halal?
5- Is gold forex trading halal?
Gold Forex trading is Shariah-compliant only under the following conditions:
1- Possession is taken by both parties in the contracting session.
2- The trade is fully backed by gold.
3- The buyer has the right to dispose of the gold.
4- No speculation or gambling.
5- No delay charges.
However, most gold Forex trades involve CFD contracts without actual gold ownership, making them Shariah non-compliant.
Read more about: Halal vs. Haram Forex Trading
References:
Panda, R., & Sethi, M. (2016). Gold as an investment option in India: Myth and reality. Indian Journal of Finance, 10(5), 7-21.
https://aaoifi.com/ss-57-the-gold-standard/?lang=en
Disclamer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
