What Is the Ruling on Trading CFD Forex and Gold ETFs?
Shafi'i Fiqh
Answered by Shaykh Muhammad Carr
Question
What is the ruling on trading (1) CFD forex and gold, and (2) gold ETFs?
Answer
In the Name of Allah, the Most Merciful and Compassionate.
May Allah reward you for ensuring that your trading is sharia-compliant.
Contracts for differences in forex and gold are impermissible as you do not own the underlying asset. Mutually taking possession of the commodity and its counter-value (taqabud) does not occur in contracts for differences. The Prophet (Allah bless him and give him peace) said, “Do not sell what you do not own.” [Tirmidhi]
Trading in a physically backed gold ETF is permitted if it represents actual ownership of gold and the possession requirements are met. Otherwise, if it merely provides price exposure through derivatives, such as a CFD, it is not permissible.
For more on the rules of money commodity exchange (sarf) please click here
Direct your trading and investments toward enterprises that participate meaningfully in the real economy. Avoid speculative trading entirely so that your earnings can acquire blessings and prosperity.
I pray this is of benefit and Allah guides us all.
And Allah (Most High) knows best.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani
Related Answers
- Is Trading Gold (XAUUSD) Through Online Platforms Permissible in Islam? – Explains why CFD-based gold trading (such as XAUUSD on MetaTrader) is impermissible because it lacks genuine ownership and immediate possession (taqabud) required in sarf transactions.
- Is Trading Gold (XAUUSD) with Exness Permissible? – Clarifies that CFD trading through brokers such as Exness is not permissible, as contracts for difference do not involve ownership of the underlying asset.
- Is It Permissible to Buy Shares of Gold ETFs? – Explains why conventional gold ETFs are generally impermissible, citing non-compliance with the rules of sarf and concerns over fund managers’ use of impermissible financial instruments.
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 benefitted 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 for 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’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.
