Current Issues in Pakistan’s Gold Trade and Their Solutions in the Light of Islamic Law

Abstract

The paper examines contemporary practices in Pakistan’s gold trade in light of classical Islamic commercial law. It begins by reaffirming the special monetary status of gold and silver in Sharia and outlines core juristic principles: equality and simultaneity of exchange in gold-for-gold and silver-for-silver transactions, the prohibition of deferment on both sides in ribawi exchanges, the permissibility of credit when one side is a currency, and the distinct rules governing istisnaʿ (manufacturing contracts). Against this framework, the study surveys four main sectors of the gold market—wholesale, manufacturing, retail jewellery, and laboratory testing—and identifies recurrent violations such as future sales without possession, sale of non-existent goods, chain trading without qabd (constructive or physical possession), and impermissible remuneration structures (e.g., “fee” deducted from the very gold being tested). The paper proposes Sharia-compliant alternatives, including replacing binding future sales with unilateral promises coupled with actual sale at delivery, ensuring at least one counter-value is possessed in credit transactions, clearly separating labour charges from the exchange of ribawi commodities, and pricing mixed items (gold with gemstones or alloys) in a way that preserves the prohibition of riba al-fadhl. It concludes that many existing contracts in all four sectors are either fasid or batil, rendering their income unlawful, and calls for comprehensive reform and awareness so that gold trade can operate within a valid Islamic contractual framework.