Trading in Commodities
  • Question:

    Is trading in commodities like Silver allowed in Islam?

    Assalamu Alaikum wa rahmatullahi wa Barakatuh

    Thank you for your question.

    Yes, it is permissible to trade commodities like silver, in Islam.

    I have listed below some of the basic principles regarding business and trade (These principles are taken from the famous fiqh manual, Mukhtasar al Quduri by Imam Abul Hasan al Quduri):

    • There must be offer and acceptance, meaning consent from both parties in the transaction. The offer and acceptance can be conducted verbally, in writing or with gestures. A sale conducted without an offer and acceptance is therefore invalid.

    • The merchandise must be pure and lawful. It is therefore invalid to transact something that is unlawful (such as wine, pork etc.).

    • The merchandise or commodity must be definite which possesses legal value in exchange for something equivalent in value (called price).

    • The seller must own the merchandise. It is therefore invalid to transact something that one does not own.

    • The merchandise must be known. It is therefore invalid to transact something that is unknown, ambiguous or uncertain in a manner that leads to dispute and deception.

    • The merchandise must be in a position to be delivered. The sale of a bird in the air or fish in the water is void. It is also invalid, for example, to transact something that a third party has wrongfully appropriated when the seller is unable to take it back from him.

    • The seller should also beware of deception, which occurs when the owner of the merchandise knows something about the merchandise that the buyer does not know which, if the buyer knew it, he would not take the merchandise for the same price. It is obligatory for the seller to inform the buyer of it so that he takes the merchandise in full knowledge.

    • The seller should also beware of swearing false oaths to promote his merchandise.

    • The seller and the buyer must refrain from usury / interest (riba).

    • Some basic principles regarding trading the precious metals of gold and silver are also listed below; (also adapted in summary from Mukhtasar al Quduri):

    • If one sells gold in exchange of gold or silver in exchange of silver, it is only permissible if there is equality in the quantity, even though they both may differ in quality and craftsmanship (due to hadith).

    • It is mandatory in the sarf transaction to take possession of the bartered gold / silver before departing from the point/place of transaction.

    • If gold is exchanged for silver, disparity is permissible in quantity, however possession must be taken at the point of transaction. If possession is not taken over both or one of the commodities (gold/silver), the transaction will not be valid.

    • It is not permissible to administer something with the commodity prior to possession.

    • If mixed metals are more, the rulings of gold and silver will not apply, rather they will be considered general commodities.

    And Allah knows best.

    Answered by Shaykh Yusuf Badat
    Hadith of the Day Imam
    Imam of the Islamic Foundation of Toronto and Director of Mathabah Institute
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