Does Vault-Stored Gold Meet Islamic Ownership Rules?

Answered by Shaykh Muhammad Carr

Question

The company offers a service for buying and selling gold online, with storage in a secure, collective vault. Customers can either buy and hold the gold, with free storage for holdings up to €10,000, or use the “GoldAvenuePay” e-wallet for instant transactions.

All purchases are provided with a certificate of ownership, and physical delivery is an option. The key question is whether this model, where gold is bought and sold instantly via an e-wallet and stored collectively rather than individually, is permissible under Islamic law.

Answer

In the Name of Allah, the Most Merciful and Compassionate.

May Allah reward you for ensuring that your income is permissible.

The platform in question meets all the requirements of Islamic Law for purchasing gold and is therefore considered valid and permissible.

In my view, it is also permissible to sell the gold, as it is physically allocated to you, not jointly owned, and a certificate of ownership is issued in your name. In other words, you have effectively taken possession of the gold stored on your behalf for a fee. A unique serial number is only assigned to the gold once it leaves storage to maintain flexibility in this market.

Buying Gold

The Prophet (Allah bless him and give him peace) said:

“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt – like for like, equal for equal, and hand-to-hand; if the commodities differ, then you may sell as you wish, provided that the exchange is hand-to-hand.” [Muslim; Tirmidhi]

Thus, if gold is exchanged for silver (or another currency), their amounts may differ, but the following conditions are obligatory: (a) that the exchange be immediate; (b) that the properties exchanged must be in the respective possession of the buyer and seller before they part company. [Misri, ‘Umdat al-Salik]

When the buyer pays via electronic fund transfer, the seller is deemed to have taken constructive possession of the price despite the delayed reflection of the price in his account due to common affliction (umum al-balwa).

You may also benefit from Mufti Taqi’s assessment supporting the permissibility of deferred payment. According to Mufti Taqi,

“As for the exchange of disparate currencies, like the Pakistani Rupee for Saudi Riyals, based on an analogy of the opinion of Imam Muhammad (Allah have mercy on him), deferment is permitted therein as well. This is because paper money (which is a constructed form of currency), if it were sold for a different currency, such as silver coins (dirhams), it is permissible for the transaction to involve both the exchange of different quantities as well as deferment in taking possession, on condition that possession of one of the two commodities is taken at the time of finalising the exchange.” [‘Uthmani, Fiqh al-Buyu‘]

Storage

After completing payment for the gold, the purchaser appoints the seller as their agent to store the gold on their behalf. This type of “dual arrangement” does not fall within the ambit of two contracts in one or a contract with an extraneous condition. It is construed as a sale with an ijara lease agreement, which is permissible.

Khatib states, “If a person enters into two fundamentally different contracts in a single transaction, such as a lease contract and a sales contract, it is considered valid according to the preferred view (Azhar).” [Khatib, Mughni al-Muhtaj]

Physical Allocation

Each product stored with GOLD AVENUE comes with its certificate of ownership, but we do not assign specific serial numbers while your products remain in storage. All stored products are physically kept in an allocated vault, off our balance sheet, and come directly from the production of our refinery in Ticino with their individual certificates. However, when requesting delivery of your products, they will, of course, come with their own serial numbers and certificates of authenticity. [Gold Avenue]

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefited from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.