The certificates can be traded in the following three methods:

  • When the transaction and settlement is cleared straight away (T+0)

There is no doubt that this method is permissible, as it mentioned by AAOIFI and others.

  • When the transaction is deferred such as in the Forward contracts

This method is not permissible.

  • When the transaction is completed on a spot basis, but the clearance and settlement is delayed by one (T+1) or two (T+2) days.

There are two possible scenarios:

  1. The certificate for the gold is allocated and transfer of ownership is established, but the price is not settled for another day or two. According to AAOIFI and other shariah advisory bodies, the delay will not have an impact on the legitimacy of the transaction. However, one the buyer cannot sell the gold until after settlement.
  2. The certificate for the gold is not registered and the gold is not allocated on the day the transaction takes place. This transaction will not be permissible.

 

And Allah knows best!

(Mufti) Billal Omarjee