It is not permissible to exchange old gold for new gold and pay the difference in value

Question :

What is the ruling regarding some of the owners of the gold shops stipulates a condition on the person selling them used gold that he must buy new gold from them?

Answer :

This is not permissible, because it is conniving to sell gold for gold with some difference between the qualities, and conniving is prohibited in the Islamic Law, because it is deception and playing with the Laws of Allah.

Ash-Shaykh Ibn ‘Uthaimin

Source: Fatwa Islamiyyah – Dar-us-salam publications

The ruling on exchanging used Gold for new Gold, like for like, while taking a Fee for Craftsmanship

Question :

What is the ruling concerning many of the people who have gold shops who deal with buying used gold (called Al-Kasr), and they take it to a gold merchant and exchange it for new gold that is specially crafted and that matches the weight of the old gold exactly? Then they take a fee for the craftsmanship of the new gold.

Answer :

It is confirmed from the Prophet Sallallaahu alaihi wa sallam that he said:

“Gold for gold, silver for silver, wheat for wheat, dates for dates, barley for barley, salt for salt like for like, equal for equal, hand to hand (i.e., paid on the spot) .”

Muslim no. 1587.

It is also confirmed from him that he said:

“Whoever increase or seek an increase, then indeed he has committed a Riba transaction.”

Muslim no. 82/1584,1588.

It is also confirmed from him that he was given some good dates, so he asked about them. The people said, “We would take a Sa’ of this for two Sa’s (of bad dates) and two Sa’s for three Sa’s. So, the Prophet  Sallallaahu alaihi wa sallam commanded that the sale be canceled and he said:

“This is Riba, exactly.”

Then he directed them to sell the power quality dates for cash, and then to use that cash to buy good dates.

From these Hadiths you can tell that what the questioner mentioned of exchanging gold for gold while adding a fee for the craftsmanship done to one of them is a forbidden matter. It is not permissible and it is included in the Riba transactions that the Prophet  Sallallaahu alaihi wa sallam prohibited. The safe method in this is that the used gold be sold for a price without any secret understanding or agreement. Then, after its owner takes money, he buys the new thing. It is better that he search for the new thing in another place and if he does not find it he may return to the person to whom he sold the gold and buy with the cash. If the person increase the price, there is no harm in that. The important thing is that there is no trading of gold for gold while paying some difference, even if the is due to some special craftsmanship work. This is if the merchant is a merchant, then the buyer can say, “Take this gold and make if for me how I want it to be fashioned, and I will give you the cost for the work when the work is finished,” there is no harm in that.

Ash-Shaykh Ibn ‘Uthaimin

Source: Fatwa Islamiyyah – Dar-us-salam publications