Investing in gold is a popular way to diversify portfolios and safeguard wealth. However, the world of gold investment comes with its own set of terminologies that can be overwhelming for newcomers. Here, we explain some of the essential terms you need to know when delving into gold investments.
The gold spread refers to the difference between the buying price (bid price) and the selling price (ask price) of gold. This spread is how dealers make a profit, and it can vary depending on market conditions, the form of gold (e.g., coins or bars), and the dealer’s pricing policy. A narrower spread often indicates better value for the investor.
Gold purity measures how much of the material is made up of gold versus other metals. It is often expressed in karats (e.g., 24K for pure gold) or as a percentage. For example:
Gold bullion refers to gold in bulk form, typically bars or ingots, and is valued by its weight and purity rather than its form. It’s a popular choice for investors looking to hold physical gold.
The spot price is the current market price at which gold can be bought or sold for immediate delivery. It fluctuates throughout the day based on global market conditions, supply, and demand.
Bai’ al-Sarf refers to the exchange of gold for money or other precious metals. According to Shariah principles, such transactions must meet the following conditions:
Hibah refers to a voluntary gift given without expecting anything in return. In the context of Islamic gold investments, hibah may be offered as a benefit, such as a small amount of extra gold or a discount, to promote fairness and goodwill.
