World Gold Council proposes digital model for gold ownership and trading

The World Gold Council has a new plan to allow investors to hold and trade digital versions of the yellow metal, issued on the same day the gold price set another record. 

At the core of the proposal are Pooled Gold Interests (PGIs), which would allow investors to hold fractional, digital claims on physical gold stored in approved vaults, according to a white paper. The concept could be rolled out early next year. 

The system is designed to merge the security of allocated gold with the ease of trading associated with unallocated accounts, while reducing credit risk. PGIs would also be electronically transferable, opening the door for gold to be more widely used as collateral or margin.

“We see this as a positive development for long term gold demand as digitization of the global financial system gathers pace,” BMO Capital Markets said in a note on Wednesday. 

Bridges gap

In today’s wholesale market, over-the-counter gold trades are settled in two main structures. The first is allocated gold, which gives investors direct ownership of specific physical bars but is operationally complex. The second is unallocated gold, which offers greater liquidity and lower costs but exposes investors to the credit risk of the institution holding the account.

The proposed Wholesale Digital Gold ecosystem would bridge the gap between these two models, according to the council and the London-based co-authors of the report, law firm Linklaters and Hilltop Walk Consulting. 

The plan builds on previous modernization efforts, including the Gold Bar Integrity programme, which applies blockchain technology to track the origin of gold bars and improve transparency.

Gold sets new record

Gold extended gains to a new all-time high on Wednesday, powered by growing bets on a US interest rate cut, as the market weighs key economic indicators ahead of the Federal Reserve meeting in two weeks.

Spot gold rose another $30 to $3,560.85 an ounce, setting records on back-to-back days. US gold futures also peaked at $3,627.70 per ounce in New York.

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