Category: Riba, Loans and Working in Banks

The ruling on selling used Gold for new Gold while paying the difference

Question :

A man works by selling and buying jewelry. So, a person will come to him with used gold and he will buy it from him while its value is known in riyals. Then, before paying the price at that place and time, the person who sold the used gold to him will buy new gold that has a known value. Then, the buyer will pay the remaining balance to him. Is this permissible or is it mandatory to pay the first price completely to the seller, the (initial) seller gives the price of what he wants to buy of new gold from that money or other money?

Answer:

In this type of situation it is obligatory to pay the value of the used gold. Then, the seller has the choice after receiving the price. If he wants to buy new gold from the one he sold to, he may, and if he wants he may buy from someone else. If he buys from him, he returns his money to him or some other money for the price of the new gold. This is so that the Muslim does not fall into the forbidden Riba by selling a lesser quality type of item that is subject to Riba for the same type of item of newer and better quality. This is due to what Al-Bukhari and Muslim recorded, that the Messenger of Allâh employed a man to be in charge of Khaybar, the man brought him some fine quality dates. So, he said:
"Are all of the dates of Khaybar like this?"

The man said, "No. Verily, we take a Sa' of this for two Sa's (of regular dates), and two Sa's of this for three Sa's (of regular dates)." The Prophet said:
"Do not do this with the group. Sell the dates that are less than this for dirhams (ie., cash). Then buy the good dates with the dirhams."

This is also because settling the account (from the balance) in this type of sale, even though it takes place at the time and place of the sale, leads to selling gold for gold of differing qualities, and that is forbidden. This is due to what Muslim recorded from 'Ubadah bin As-Samit that the Messenger of Allah said:
"Gold for gold, silver for silver, wheat for wheat, dates for dates, barley for barley, salt for salt, like for like, the same for the same, and hand to hand (i.e., paid on the spot). If these types of items differ, then sell however you wish, as long as it is hand to hand (i.e., paid on the spot)."

In another report from Ibn Sa'id, he (the Prophet) said:
"So, whoever increases or seeks an increase, then indeed he has indulged in Riba, the taker and the giver alike."

Source:
The Permanent Committee
Fatawa Islamiyah, Vol. 3 Pages 364-365