Guest Post: Are Commodity Investments Shariah-Compliant?

Investors looking for new opportunities in today’s economic environment hear a lot about the idea of investing in tangible commodities, such as precious metals like gold and silver. This is certainly an interesting sort of alternative investment, and essentially has a whole different set of pros and cons from other types of investment. For the most part, people who invest in these sorts of commodities tend to do so more in the hopes of achieving financial stability, as opposed to monetary gain. The values and prices of precious metals do not often shift dramatically, and are not tied to any particular company or economy, so putting your money behind them can help you to avoid drops in the value of your money if it is kept in currency form. But, is investing in these sorts of commodities Shariah-compliant? Let’s see if it passes the three main requirements for a Shariah-compliant investment.

  • The first requirement is that Shariah prohibits the earning of interest via investment opportunity. This is not to say that people following Shariah are not allowed to profit, but that profit must be the result of production in the actual investment, as opposed to simple interest earned through lending. Tangible commodities like precious metals would seem to be fine under this rule, as the only gains that can be earned would be due to slight increases in the prices of such commodities between the time at which you purchase bullion and the time when you withdraw your investment.
  • The second requirement is that Shariah prevents investments in unethical industries (such as alcohol, pornography, tobacco, etc.). Most tangible commodities will certainly be permissible under Shariah as far as ethics go, and the specific idea of investing in precious metals is completely fine.
  • Finally, Shariah demands that a strict and all-inclusive contract be drawn up for any long-term investment. This is so that all of the details are down on paper in a single place, which can help prevent future disputes and complications. In fact, the actual clarity of this contract is also subject to the potential of being prevented by Shariah, if there is found to be any possibility of ambiguity or future disputes. So, in order to be certain that your commodity investment is Shariah-compliant, be sure to have a thorough and all-inclusive contract drawn up.

While these are indeed strict guidelines that prohibit many types of investments, most commodities seem to be fair game. And, fortunately, there are quick and convenient ways to invest in such things. For example, a quick visit to Bullion Vault will allow you the opportunity to place your money behind gold bullion, which is a fairly common commodity investment, particularly in times of economic uncertainty. Be sure to structure a careful contract, and you should be all set!

James Allen is a programmer and writer for numerous investment sites online. He has written on the subjects of commodity investment and new financial opportunities.

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