Gold has a long-standing tradition as a medium of exchange and store of value. Historically, gold and silver were used as fiat money, but today, government-issued currency such as the Malaysian Ringgit, Pound Sterling, and US Dollar are more commonly used. As Muslims, we are encouraged to increase our wealth as it can contribute to economic growth. In addition to stock trading, investing in gold is another option to consider. In this article, we will provide an overview of how to invest in gold in compliance with Shariah regulations.
Rulings on Gold Investment
It is important to note that gold is considered one of the Ribawi items under Shariah regulations. The rules for gold investment are outlined in a hadith from Prophet Muhammad PBUH, as narrated by Imam Muslim:
"(If) gold is sold with gold, silver with silver, wheat with wheat, dates with dates, salt with salt, the value (weight and value) must be at par and pay cash on the spot. Whoever put addition or asks for an addition, they have practised Riba'. Whoever took the addition (from the original value) and who paid for the addition both of them committed sin." Sahih Muslim (1587)
From this hadith, there are two main conditions to comply with when investing in gold. Firstly, the trading must be conducted using cash or debit card, and the gold must be handed over during the Akad ceremony. This is in line with the principles of ijab (offer) and qabul (agreement).
Second, transactions involving gold must comply with the condition of parity and equality in quantity or weight, even when dealing with items of varying quality. The Muftis in Malaysia has issued a ruling which allows business owners such as banks and gold investment companies to engage in business activities while ensuring that profits and risks from these investments are shared between the investors and the business owners.
A Beginner's Guide to Investing in Gold
In the modern age, financial institutions have developed various investment options to help people invest better and improve economic growth. For Muslim investors, there are a few types of gold investments that are compliant with Shariah law.
One traditional method of gold investment is buying physical gold in various forms, such as jewellery, gold bars, or coins. This type of investment allows investors to hold onto their gold and sell it when prices are high. As some people choose to pass their gold down to their heirs, this type of investment is often considered a long-term investment. However, it should be noted that this traditional method of gold investment requires safekeeping, which can be done by storing it in a personal location, such as under the bed, in a safe box, or in a drawer, or by keeping it in a safe storage facility provided by banks or third-party storage firms that are insured by insurance companies.
Another option for gold investment is through monetary institutions such as banks or gold investment companies. This type of investment is based on the value of current gold prices and aims to gain a return. The amount invested can be vary, subject to the minimum and maximum amounts fixed by the banks or gold investment companies. A Shariah-compliant gold investment will also offer the option of keeping the gold on your own or letting the institution hold and keep the gold for you. They will also issue an account book for recording and tracking the amount and value of the gold you own for future transactions. You are also free to sell the gold to the bank or any potential buyer to gain profits from the investment.
Another option for gold investment is through Exchange Traded Funds (ETFs). This type of investment does not involve buying physical gold, but rather investing in an ETF that is backed by gold. This option allows investors to invest in gold without the need for safekeeping. However, it is important to choose an Islamic gold ETF such as HelloGold or TradePlus Shariah Gold Tracker.
Lastly, as a Muslim gold investor, it is important to fulfill the responsibility of paying zakat for the gold you own. The rate and quantity of zakat will vary according to the guidelines of Zakat Selangor, and the rate for gold ownership is typically 2.5%. However, there is an exception for gold used for jewellery and daily life. According to Pusat Pungutan Zakat (PPZ), gold used as jewellery is not compulsory for zakat. However, if one wears it excessively or exceeds 800 grams, it is obligatory to pay zakat.
Conclusion
In conclusion, gold investment is an important aspect of managing wealth for Muslims. There are several Shariah-compliant options available, including traditional physical gold, gold investment through monetary institutions, and gold ETFs. It is important to take into consideration the safekeeping of physical gold and the responsibility to pay zakat on gold ownership. As Muslims, handling wealth responsibly and making contributions to the community through sadaqah and zakat are important spiritual attributes. With careful consideration and research, gold investment can be a valuable part of a well-rounded investment portfolio.