Ethica Institute of Islamic Finance™

May I exchange gold and silver for each other if the market value is not consistent with the face value?

When the market value of a gold or silver commodity is different from its face value (e.g. a $1000 gold coin is selling for $1100), or when the value addition to a gold or silver item increases its price in relation to its value in weight (e.g. gold jewellery worth $1000 in weight sells for $1100), its purchase in the same commodity (e.g. gold purchased for gold) for an amount other than its face value is forbidden.

In order to make the purchase, it is necessary that one pay in a different currency (e.g. in cash or a similar exchangeable monetary instrument, in silver if buying gold, or in gold if buying silver). It is permissible to pay a part of the amount in the same commodity and the balance in a different currency (e.g. a gold coin whose face value is $100 and market value is $110 may be purchased with $90 of gold and $20 of cash). As a general rule to avoid riba, gold and silver and their products should be paid for in cash or a combination of the commodity and cash, and always on spot.

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