Ethica Institute of Islamic Finance™

How does the international trade department of the bank deal in gold and what is the Shariah ruling in regard to the promise to sell or purchase gold?

Gold is purchased and the full price is paid and it is stored in the treasury of the correspondent bank in the Islamic bank's name. The bank then sells the gold to the one willing to pay the price acceptable to it, such that the transaction is hand to hand, the gold is delivered to the purchaser and the payment is received from him at the same time and place.

The bank may at times enact a promise to sell the gold it possesses at a later time for a higher price than its own purchase price based on the understanding that the exchange takes place hand to hand at the appointed time and without any advance. A promise is considered binding if a reason is given for soliciting it whether or not the one soliciting it becomes involved.

If no reason is given, then a promise is not binding and the one soliciting it is not bound to honor it. So there is no legal impediment to a promise to trade in gold as long as the sale or the exchange takes place after it and is Shariah compliant in terms of the transaction being hand to hand, at the same place and at the same time.

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