We can classify the opinions of the scholars into 2 categories:

  • It is not permissible to purchase allocated gold certificates. Even though the ownership of the gold is established through allocation, the mere certificate does not represent possession. This opinion is based on principles established by a group of traditional scholars.

Proof: It is mentioned in a hadith that: ‘The Messenger of Allah forbade selling gold for gold… unless it was like for like, hand to hand’. [narrated by Muslim]

The above mentions that the exchange must be done hand in hand. Hence, we must act upon the literal wording of the hadith.

  • It is permissible to purchase gold certificates if constructive possession of the gold can be established through them. This is the opinion of AAIOFI and some other fatwa departments.

Proof: The concept of “possession” must not be restricted to physical exchange. Conversely, the concept must be based according to customary practice. In the time of the prophet (pbuh) the only way to take possession of an item was physical. Hence, the prophet (pbuh) mentioned the physical method which was the only known method.

And Allah knows best!

(Mufti) Billal Omarjee