Question Summary:
Is it permissible to invest in the Blackrock Canada gold/silver bullion fund?

Question Detail:

Assalam u aleikum,
I hope this query reaches you in the best state of iman and health. I am currently looking towards investing some savings into halal investments. In particular, I was considering commodity exchange traded funds which mimic the value of a given commodity. Specifically, I was thinking about iShares Gold Bullion ETF (http://ca.ishares.com/product_info/fund/overview/CGL.C.htm) and iShares Silver Bullion ETF (http://ca.ishares.com/product_info/fund/overview/SVR.C.htm). The company does offer a fund that is actively managed and hedged but both of these ETFs are not. Further information on each fund including their investments and assets can be found at the following links:(http://ca.ishares.com/content/stream.jsp?url=/content/en_ca/repository/resource/prospectus/cgl_prospectus_en.pdf) and (http://ca.ishares.com/content/stream.jsp?url=/content/en_ca/repository/resource/prospectus/svr_prospectus_en.pdf). Please do let me of the permissibility status of these funds.
 
Also, I would like to know if a gold bullion is considered a liquid asset or an illiquid asset from an islamic perspective. I understand that the majority (~90%) of the net assets in the abovementioned funds are in precious metals as real solid bullions housed in the bank. These would be considered liquid assets financially.
 
Jazak Allah u Khairan

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
 
Hereunder is a brief of the iShares Gold Bullion ETF scheme:
Investors buy units in the fund that are backed by gold bullion. The company fund holds the gold bullions at a specific location for a certain period of time. The prices of the units fluctuate according to the price of gold. [1]
 
“Each Unit of a class of an iShares Fund represents an equal beneficial interest in that class of the iShares Fund” (Page 5 of the prospectus).
“Unit holders of the iShares Funds are not shareholders of a corporation” (Page 11 of the prospectus).
It is clear from the above clauses from the prospectus that purchasing shares from either of the Funds (Gold or Silver ETF) is simply to track its change of price (i.e. an interest in the trust and not the gold itself) and does not represent a direct proportionate ownership. Therefore, an investor would be purchasing a share of the trust and not of the gold itself. Hence, the owner of ETF shares cannot redeem those shares for the physical metal.
The holder of a physical gold ETF, the individual is merely the owner of a gold-denominated debt security by a trust that owns the gold.[2] According to the Ulema that permit investing in stocks: “Stocks represent a proportionate ownership in the company”[3]
Accordingly, the money that is invested into CGL is not represented by any tangible product/commodity. Hence, the investment contract is impermissible.[4]
 
 
 
 
And Allah Ta’āla Knows Best
Saleem Ibn Sajawal Khan
Bradford, UK
Student Darul Iftaa

Checked and Approved by,
Mufti Ebrahim Desai.