Answer:
Thank you for your question. It is best to break it down into two parts:
- How is bidding perceived in Islam?
- Can you engage in bidding with gold?
How is bidding perceived in Islam?
Bidding is classified under a type of sale contract known as Bai’ Muzayadah (بيع المزايدة). Bai’ Muzayadah refers to the process where a seller offers goods for sale in a marketplace, and multiple buyers compete by offering progressively higher prices. The sale concludes when the highest bidder purchases the item, which aligns with the modern concept of an auction.
The majority of scholars consider Bai’ Muzayadah permissible under Shariah. IFSG has also already engaged with similar questions in the past in our FAQ #33, #64 and #163. Do check out our past FAQs for a more in-depth explanation.
Can You Engage in Bidding with Gold?
While we have established that bidding in general is permissible, when it comes to gold, an additional element must be considered. This is because gold is classified as a ribawi item, a commodity subject to specific Shariah regulations concerning riba al-fadhl (usury of excess).
In riba al-fadhl, the rules differ depending on what is being exchanged. If gold is exchanged for gold, the trade must be done immediately on the spot (taqabudh — hand-to-hand exchange) and both sides must be equal in amount (tamathul — equal value), so there can be no excess on either side. If gold is exchanged for another ribawi item of a different category, such as silver or modern fiat money (paper currency), the exchange must still be done immediately on the spot, but the values do not have to be equal. However, when gold is exchanged for non-ribawi items, such as clothes, electronics, or other ordinary goods, these specific conditions do not apply.
This ruling is based on the following hadith of the Prophet (ﷺ):
عن أبي سعيد الخدري رضي الله عنه أن رسول الله صلى الله عليه وسلم قال:
“الذَّهَبُ بِالذَّهَبِ، وَالْفِضَّةُ بِالْفِضَّةِ، وَالْبُرُّ بِالْبُرِّ، وَالشَّعِيرُ بِالشَّعِيرِ، وَالتَّمْرُ بِالتَّمْرِ، وَالْمِلْحُ بِالْمِلْحِ، مِثْلًا بِمِثْلٍ، يَدًا بِيَدٍ، فَمَنْ زَادَ أَوِ اسْتَزَادَ فَقَدْ أَرْبَى، الْآخِذُ وَالْمُعْطِي فِيهِ سَوَاءٌ.”
“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt—must be exchanged in equal amounts, hand to hand. Whoever gives more or takes more has engaged in riba, and both the giver and receiver are equal in sin.” (Narrated by Muslim)
How Does This Apply to Bidding for Gold?
Based on this hadith, bidding for gold is permissible under the following conditions:
✅ If you bid using regular currency (fiat money) and make an immediate payment upon winning the auction, the exchange is valid and allowed.
❌ However, the transaction becomes problematic if:
- The payment is deferred to a later date (i.e., paid in installments or on credit).
- A payment schedule is set up to fulfill the purchase.
- Gold dinars (or other forms of gold) are used as the bidding currency to purchase gold, but the exchange is not equal in weight and value.
In such cases, the transaction would fall under riba al-fadhl, making it impermissible according to Islamic law.
Hence, to answer the main question if bidding for gold for a reduced price (starting from $1) in an auction is permissible in Islam. We are of the opinion that it is permissible as long as they meet the requirement of taqabudh (immediate exchange), as this falls under different items of the same ribawi category (thaman). Even if they are of different value, that transaction is valid as long as there is knowledge, mutual consent, and absence of deception between the contracting parties.
However, if there is an extreme differential between the price paid for the gold and the value of the gold itself, such that one manages to bid $1 for 100g of gold, this may be a trigger the case for an abnormal transaction. This unusual outcome may indicate a structurally unsound auction mechanism if the system inherently exposes the seller to a gross and avoidable loss. While a no-reserve auction beginning at $1 may technically be valid when the seller knowingly accepts the risk, this structure becomes problematic for high-value ribawi assets such as gold if there exists a realistic possibility that substantial quantities of gold could be sold for a trivial amount due to low participation, suppression of fair bidding, collusion, or manipulation of the auction environment.
If the extreme price differential arises through exploitation of the auction structure, suppression of fair bidding, manipulation, or the seller’s ignorance of market value, then it constitutes excessive inequity (ghabn fahish), which is strictly prohibited. Ghabn fahish occurs when a party is induced into a transaction at a price that grossly departs from the recognised market value beyond what is normally tolerated in commercial custom and fair bargaining. This concern is particularly significant in the case of gold, whose market value is publicly known, liquid, and easily ascertainable, making substantial deviations from market value far less tolerable than in ordinary goods.
If such an abnormal price is secured through deception, collusion, artificial suppression of bids, or exploitative manipulation of the auction process, the deceived party is granted the Option to Revoke on Grounds of Price Gouging (Khiyar al-Ghabn). This legal option allows the wronged party to annul the contract entirely, or to accept it, potentially with a mutually agreed indemnification to correct the extreme price difference.
If, however, the seller is fully aware of the gold’s true market value and willingly agrees to sell 100g for a trivial amount like $1 without any coercion or deception, the majority of jurists consider the sale valid and permissible. Islamic jurisprudence dictates that a rightful owner is permitted to sell their abundant wealth for a trivial amount, just as they are permitted to give it away as a free gift. In this case, one may see it as a quasi-gift, where the seller engages in a transaction in full knowledge that it will not benefit him materially.
As referenced to Al-Qurtubi:
والجمهور على جواز الغبن في التجارة، مثل أن يبيع رجل ياقوتة بدرهم، وهي تساوي مائة ألف، فذلك جائز، وأن المالك الصحيح الملك جائز له أن يبيع ماله الكثير بالتافه اليسير، وهذا ما لا اختلاف فيه بين العلماء إذا عرف قدر ذلك، كما تجوز الهبة لو وهب
“The majority of scholars hold that disparity in trade (ghabn) is permissible. For example, if a man sells a ruby for one dirham when it is actually worth one hundred thousand, this is still considered valid. A person who rightfully owns property is allowed to sell something of great value for a small and insignificant amount. There is no disagreement among the scholars regarding this, so long as the person knows the value of what he is selling. Likewise, it is permissible for him to give it away as a gift.”
Allah knows best.
