INTRODUCTION

God created the two precious metals, silver and gold to serve as a measure of all commodities. Gold had played an important role for many centuries in a way or another until the end of Bretton Wood. After the collapse of Bretton Wood’s system fiat money and a floating rate exchange system have taken place in the monetary system. Fiat money is created out of nothing by the power of an issuing authority. With the spread of Islam, the dinar was minted in large quantities and gradually displaced the bezant gold coin as the major international currency, circulating throughout the Muslim world and the Christian Europe as well.
The creation of dirhams and dinars is one of the blessings of Allah. They are stones having no intrinsic usufruct or utility but all human being needs them because everybody needs large number of commodities. The needs to revisit the gold dinar as a monetary stability has been voiced out by many scholars and ulama’s since 1970s. The resistance towards the interest economy could be the major motivation for the comeback of gold dinar. The prohibition of interest is not only mentioned in the Quran but the Bible and Torah.
The gold prices are indeed relatively stable compared to other commodity prices, exchange rate movement and the stock market index. Manipulation of currencies and the impact toward one economy could be reduced because of the fact that gold does not inflate in value as it is a commodity and, thus has an intrinsic value. The counterfeiting would be checked if gold coin were used.
By sing dinar and elimination of interest, Islamic country would have a stable currency and monetary systems, money supply growth can be expected not to overshoot growth in the real sector, thus eliminating the inflationary pressure in the economy. If all these exchange rates are eliminated by means of a single currency like