Gold and Silver in the Qur'an
The Quran points to the importance of Gold and Silver in various ayats: "To mankind the love of worldly appetites is painted in glowing colours: women and children, and heaped-up mounds of gold and silver, and horses with fine markings, and livestock and fertile farmland. All that is merely the enjoyment of the life of the dunya. The best homecoming is in the presence of Allah" Sura Al Imran, 14.
In other words our attachment to gold and silver is not something ephemeral and which will be supplanted by paper [money] – it is a part of our fitra, our natural make-up. To deny it is to deny this natural love for it. This appetite for it is tempered – and purified - of course by the payment of part of it in zakat. This purification can only take place if gold and silver are freely available in the form of gold dinars and silver dirhams.
Dinars and dirhams are explicitly sanctioned in the Qur’an by the following ayats: in sura al-Imran 74: "Among the People of the Book there are some who, if you entrust them with a pile of gold, will return it to you. But there are others among them who, if you entrust them with just a single dinar, will not return it to you, unless you stay standing over them." And in Sura Yusuf, 20: "They sold him for a pittance, a few dirhams, considering him to be of little worth."
Gold and Silver in legal judgements
Dinars and dirhams form the basis of a great number of legal judgements in fiqh, from matters of marriage to commercial contracts. In other words, without these coins justice cannot be established in many aspects of Islamic law. Imam Malik, radi Allah anhu, for example said : "I do not consider that women should be married with less than a quarter of a dinar"Muwatta, Bab an-Nikah.
Gold and Silver in Zakat
Ibn Ashir says in al-Murshid al-Mu’een: "Zakat is a fard obligation on everything which has been laid down (in the shari’at): gold and silver, grains and fruit, and grazing livestock." It is well known that zakat on livestock and on agricultural produce is payed in kind but as Ibn Ashir in al-Murshid al-Mu’een notes: "on goods for trade, and on a credit incurred (as capital) to buy and sell (on a daily basis), the amount due is the same as gold and silver ". In other words the goods one trades in are also evaluated in terms of gold and silver when assessing their zakat.
There is no zakat on fulus [copper money], and so by extension none on paper fulus. See Imam Malik.
Gold and Silver and Leadership
The essential nature of gold and silver currencies in Muslim society is emphasised too in the link between authority and currency. One of the seven responsibilities of the person in authority is to ensure the minting and purity of gold and silver coins. Al-Qurtubi in his Tafsir al-Jaami li Ahkaam al-Qur’an cites the first of the seven matters in which the leader of the community is to be obeyed as "the minting of dirhams and dinars" In other words not only is the establishment and overseeing of bimetal currency a duty of the person in authority but also obedience in accepting and promoting it is a duty of the people. The importance of the mint lies in its reviving the means of purification of society from riba and from its denial of fitra.
Thus tawhid manifests in the aqeeda but also in the myriad aspects of the mu’amulat: Allah has prescribed how to act in every situation. To deny that Allah and His Messenger have prescribed the necessity of the mint, the dinar and dirham, the market and just trade is to deny tawhid. People without tawhid make a split between this world and the next – the Muslim ruler joins, unites and establishes tawhid: in his capacity as the safeguarder of the mint, the bayt al-mal, the markets, the currency and trade he ensures that tawheed extends into this world.
The Muslim ruler is responsible for the purity of the currency in his realm. Therefore he is also responsible for setting up a mint. Only coins of pure gold and silver are legal currency, and only those sanctioned by him. The mint ensures the flourishing of trade, and as we know from the Messenger, sallallahu alayhi wa salam, nine tenths of wealth is from trade. The mint is a "grounding" of finance – instead of the fantasy world of figures in the stock exchange and on paper currency, the production of dinars and dirhams purifies and legalises the gold and silver extracted from the earth.
Ibn Khaldun points out in the Muqaddima that the degree of power of the ruler is reflected in the purity of the gold and silver coins minted under his authority: only the purity of the gold and silver can safeguard his rule. The impurity of the coins in a realm indicate the imminent collapse of the ruler.
Abu Bakr ibn Abi Maryam related from the Rasoul, may the peace and blessings of Allah be upon him, that "a time is certainly coming over mankind in which there will be nothing else which will be of use to pay other than a dinar and a dirham".
The mint ensures the flourishing of trade, and as we know from the Messenger, sallallahu alayhi wa salam, nine tenths of wealth is from trade. As Umar Vadillo has pointed out in the End of Economics - in this society trade is forbidden and usury is permitted, the exact opposite of Allah’s ayat.
The inviolability of Gold and Silver
Gold, silver and storable, measurable foodstuffs are all commodities subject to riba. As such they are currencies against which other things not subject to riba are valued. These commodities admit of no exchange which entails an increase. When gold is exchanged for gold or silver then it must be like for like and immediate, from hand to hand. If there is any delay it is riba, usury. In other words riba is not merely "interest" but a far more radical interdiction.
Again, Marwan ibn al-Hakam, the fourth Umayyad Khalif forbade the buying and selling of chits of paper [used to distribute foodstuffs to specific persons] denouncing it as riba.
This too clearly demonstrates that riba is not merely "interest". It was not the chits of paper as such that were forbidden as riba but the buying and selling of them as if they were a commodity. Another of the meanings of riba is that you exchange one thing for something of less value: Ibn Rushd declares in his Bidaya that one would not sell a horse for a shirt for there would be an unjust excess of profit for one partner. Likewise the exchange of a piece of paper [as ‘paper currency’] for something of worth is an example of riba. Gold and silver ensure the abolition of these aspect of riba.
Ibn Rushd says in the Bidaya al-Mujtahid: "It is obvious from the law that the purpose of the prohibition of usury is prevention of the fraud that usury entails, and ensuring equity in transactions consisting in close approximation and equivalence between the goods exchanged."