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I've noticed that the stocks and shares market gives investers the ability to invest in physical gold without having to have the physical gold, i.e. view EFT's such as LON:PHGP.

ETFS Physical Gold (PHGP) is designed to offer security holders a simple, cost-efficient and secure way to access the gold market by providing a return equivalent to the movements in the gold spot price less the applicable management fee.

PHGP is backed by physical allocated gold held by HSBC Bank USA (the custodian). Only metal that conforms with the London Bullion Market Association's (LBMA) rules for Good Delivery can be accepted by the custodian. Each physical bar is segregated, individually identified and allocated.

Sounds like when you buy a share of such an exchange-traded fund ETF, the gold is held for you in a bank, where the value of your ownership of your gold depends on the current market value of the gold.

So my question is, is such an investment halaal? I guess that I am really asking is, can anyone give me any reasons why such an investment might be haraam?

Sunni view preferred.

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    even if the gold is really physically held by the bank for you there are other aspects relevant for evaluating whether this halal or haram... for example: what is the nature of your investment ? speculation ? trading ?... another point: if it is an investment (and not trading) you need to pay zakat on it every year... etc.
    – Yahia
    Commented Mar 25, 2013 at 0:11
  • Gold's value stays constant. The price rise is because the value of the currency is going down rapidly with the world's current economic climate. So, it's not riba and a good way of maintaining the value of your wealth. However, as you are freezing your wealth instead of investing it, quite a bit that income will go into zakat (which is not really a bad thing).
    – Muz
    Commented Mar 25, 2013 at 6:49
  • @Muz, I understand that the gold will be zakatable, but if I have 10,000USD cash, I would have to give 2.5% on that anyway, where the 10,000USD's value would reduce daily due to inflation. But with gold, if I buy 10,000USD worth of EFT gold, I understand that I will have to give 2.5% zakat, but at least it's value will not deduce as fast as the USD due to inflation.
    – user3550
    Commented Mar 25, 2013 at 9:52

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So is such investment halaal? I'd safely say NO. If in doubt stay away from it.

Explanation...

The subject of Islamic trading is very vast and it is misrepresented and misinterpreted by so many modern western-educated people. But the scholars of old and recent times (like Ibn Taymiyya, Ibn-Qayyim, Ibn Baz, Ibn Uthaimeen, Al-Albaani, Salih Al-Fawzaan, etc) from the lands where Islaam's roots spread should be our best references to learn the authentic sources like Bukhari, Muslim and so on...

Now, I don't want this to sound like a thesis so I'll just quote one hadeeth and I think that would be sufficient, insha Allaah.

Sh. Ibn Baaz quotes Saheeh Muslim and the meaning of it is:

Gold for gold, silver for silver, wheat grain for wheat grain, barley for barley, dates for dates, salt for salt: equal in weight , equal in amount and from hand to hand. When these types are not the same kind, then sell as you like as long as it was from hand to hand.

From the above hadeeth let us learn some key points.

  1. There are 6 items mentioned. Gold, silver, dates, barley, wheat, salt.
  2. Each of the 6 things must be transacted or barted hand to hand (that means no delay in payment)
  3. These things need to physically move hand
  4. The amounts must be the same if they're of the same type.

Now, I presume you know that money gets its value by equivalent gold reserves. Of course, today there are a lot of manipulated ways of showing money's value. So money represents gold/silver just like a cheque represents money.

Thus we should:

  1. purchase gold in physical amounts
  2. Gold must change hand
  3. Payment must be on the spot.
  4. If you delay the payment even by half a day, it becomes ribaa.

So answering the core of your question... I think it's safe to avoid dealing with gold online.

Wallaahu a'lam.

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    money gets its value by equivalent gold reserves: This hasn't been true for many years; the value of modern fiat currency is juristically more akin to fulus than it is to physical gold.
    – goldPseudo
    Commented Sep 25, 2013 at 14:42
  • Don't you think that we need to define again what hand-to-hand means? If it means the literal meaning that you have referred to, then isn't paying in the market with a debit card(not creditcard) haram? Isn't a bank transfer haram because it takes 2-3 days in which time the value of the currency has changed?
    – detraveller
    Commented Jan 6, 2014 at 10:56
  • @detraveller Yes, it means literally hand to hand.
    – itsols
    Commented Jan 6, 2014 at 12:25
  • @itsols a bank transfer is haram? Payment by debit card is haram?
    – detraveller
    Commented Jan 6, 2014 at 16:43

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