Answering this question requires two basic introductory remarks:
The main goal of the Islamic law of transactions is to achieve justice and block all possible means for great risks, cheating or injustice. The default rule of all transactions is that they are all lawful unless there is a restriction or a prohibition which has a proof in a clear text of the Quran or Hadith.
Types of Commodity Trading
There are four types of a commodity trading:
(1) Spot commodity trading where a commodity and price exist on the spot. It is permissible according to the unanimous agreement of all scholars.
(2) Future commodity trading based on a delay in both commodity and price is not permissible. The Prophet (peace be upon him) prohibited the sale of deferred (commodity) for a deferred (price). The Islamic Fiqh Academy ruled against such a transaction in its Seventh Annual Full Meeting 1412 A.H./1992 (Resolution No.63/1/7).C).
(3) Future commodity trading based on a delay of receiving the commodity such as A sells B a ton of sugar which will be delivered by next August while price has already been cashed or transferred to B’s account. This is called salam or buying in advance. It is the sale of described merchandise which is under the seller’s obligation to deliver to the buyer at a certain time. The Shariah regulated this type of transaction by setting certain conditions to prevent injustice and possible risk.
(4) Future commodity tradition based on a delay in receiving price. It is permissible provided that it does include a usurious interest. For example A sells a car for B for 10.000 US on installments, after a month he raises the amount to be 12.000. Moreover, the price and the commodity should not be of the six categories that the Prophet has assigned to be usurious, i.e. gold, silver, wheat, barley, dates and salt.
Conditions of Gold and Silver Exchange
In case one exchanges gold for gold or silver for silver, three conditions has to be met:
1- Both price and commodity must be paid simultaneously. This is based on the report related by Muslim on the authority of Ubadah ibn As-Samit that the Prophet said, “Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand.
If these classes differ, then sell as you wish if payment is made hand to hand.” The phrase, ‘hand to hand’ means that the transaction must be concluded on the spot by delivering price and commodity.
2- In each transaction, the Shariah gave a purchaser and a seller the choice to buy something and even try it for a certain period where both parties can later cancel the contract by returning price to the buyer and the commodity to the seller. This is called khiyar, i.e. both the buyer and seller have the right to stipulate an option to cancel period, an interval during which either party may cancel the agreement. This khiyar or option to cancel is not applicable to usurious commodities. This is based on the hadith of `Umar ibn Al-Khattab who reported the Prophet saying, “[Exchanging] gold for silver is riba unless it is done on the spot. [Exchanging] dates for dates is riba unless it is done on the spot. [Exchanging] wheat for wheat is riba unless it is done on the spot. [Exchanging] barley is riba unless it is done on the spot.”‘ (An-Nasa’i) It has been graded as authentic).
3- The quantity of price and commodity must be identical i.e. of equal weight. This is in case one sells gold for gold or silver for silver. This is based on the Prophet’s saying, “like for like and equal for equal.” In case one sells gold for silver or gold for dollars, this condition is not required but the other two conditions must be met.
Gold trading through an online medium
Based on those introductory premises, a gold trading through an online medium is permissible if the following conditions are met:
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- The price must be paid to the seller immediately or transferred to his account.
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- After the transaction, the seller is obligated to give the gold to the buyer immediately or to the one he empowered to receive it on his behalf. However, the seller can still keep that gold as long as:
The internet company works as a wakeel, i.e. it is empowered by you to trade on your behalf. In this case, you pay the company and it trades on your behalf. The company must receive gold and send it to you or keep it as a trust. It cannot make any transaction on that gold without your permission.
Allah Almighty knows best.
