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What Is the Islamic View on the Recent Gold Investments (Dubai Gold Souk…)?


Hanafi Fiqh

Answered by Shaykh Umer Mian

Question: Assalamu alaykum

What is the islamic view on the recent gold investments (Dubai gold souk, golden premier club, etc)?

You invest a certain amount and you get back your money with a fixed profit after some weeks.

Answer: Asalamu alaikum wa rahmatullahi wa barakatuhu

Short answer:

These investment products are interest-bearing accounts. The return they provide is riba and hence impermissible.

Detailed answer:

First of all, some clarification of terms is necessary. The Gold Souk is a marketplace for gold jewelry and gold bullion located in Dubai, United Arab Emirates. This retail marketplace is one of the major attractions of the city of Dubai. It has been established for decades and is carefully regulated by the Dubai government. For more info., see the following link and this one.

Dubai Gold Souk or DGS is a relatively new financial institution that provides “investment opportunities in gold and cryptocurrency through the use of its coin called DGS-coins.” Investors purchase these virtual coins and then earn a daily fixed rate of return ranging from 1% to 2.5%. For more info., see the following link and this one.

It is important to note that DGS is not selling actual gold products like the retailers at the actual Gold Souk in Dubai. Rather, DGS is selling “virtual coins” that the company claims are tied to the gold and cryptocurrency markets. Furthermore, DGS has not had their investment product certified by any Islamic scholars and they make no claim of being Sharia-compliant.

Looking at the investment product offered by DGS, it provides a predetermined fixed rate of return irrespective of the profit or loss on the underlying asset (assuming an asset even exists). This is clearly a type of interest-bearing account. It is riba and hence impermissible.

Ibn Mas`ud (Allah be pleased with him) related that the Prophet (Allah bless him and give him peace) said, “Usurious money, even if much, becomes paltry in the end.” [Ahmad, Ibn Maja, and Hakim, with a rigorously authenticated chain of transmission].

Wassalam,
[Shaykh] Umer Mian