Ethica Institute of Islamic Finance™

Is it permissible to purchase precious metals from the international market?

And may one take a down payment which may be forfeited and the seller freed of the agreement in the event that the buyer does not make a payment within the stipulated

The sale of precious metals in the international market is termed a sale of a non-existent because the object of the sale is not present. If the object of sale is gold or silver, a deferral in no way may become a part of the deal in regard to the object of sale nor its price since mutual receipt is essential to the completion of such a contract. In the event that the object of the sale is a metal other than gold or silver, then all the conditions of a Salam contract must be complied with including the receipt of the price in its entirety and the specification for the time of delivery.

In the event that the metals are present physically with the seller and the contract is completed, it is not lawful to defer the exchange of the two counter values lest it become a sale of debt for debt. In case the seller offers to sell the metal at a certain price and promises to honor it for a certain period of time, then this may be considered a binding offer and it is lawful for the buyer to advance a sum on the understanding that when the deal is concluded the advance will be deducted from the selling price and if the deal is not concluded, the advance will be left to the seller.

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