The World Gold Council (WGC), alongside law firm Linklaters and Hilltop Walk Consulting, has put forward a plan to overhaul the global gold market through a Wholesale Digital Gold ecosystem. This initiative seeks to improve the ownership, trading, and utilization of gold, aiming to bridge gaps in the current system.
The proposal arrives at a time of record gold prices. Spot prices surged above $3,560 an ounce on Wednesday, extending a rally powered by growing expectations of a U.S. Federal Reserve rate cut. Futures in New York also hit fresh highs.
Traders point to a mix of macro and structural drivers, including sovereign debt concerns and doubts about central bank independence. “Growing concerns over the independence of the US central bank are further undermining trust in dollar-denominated assets and pushing investors toward gold,” analysts at Heraeus Metals said, according to Reuters.
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Gold247 and Digitalization
The WGC’s Gold247 program is structured in three main pillars. These include Gold Bar Integrity, Wholesale Digital Gold, and the Standard Gold Unit. Together, they aim to digitalize the gold supply chain and trading infrastructure, ensuring greater transparency and flexibility for both institutional and retail participants.
Gold Bar Integrity, already piloted in partnership with the London Bullion Market Association, uses distributed ledger technology to track responsibly sourced gold bars across the supply chain.
Wholesale Digital Gold, the centerpiece of this latest proposal, would introduce pooled gold interests, fractional, electronically transferable claims on vaulted bars that provide both the ownership certainty of allocated gold and the liquidity advantages of unallocated gold.
The Standard Gold Unit, still under development, would harmonize bar sizes, grades, and trading standards across markets by creating a digital representation of one gram of pure gold. This tokenized unit would make gold fungible across borders and trading systems, opening the door to new applications in collateral management and settlement.
Closing the “Opportunity Gap”
WGC officials say the digital ecosystem is intended to address what they describe as a long-standing structural shortcoming. Allocated gold gives certainty of ownership but is operationally cumbersome and costly, while unallocated gold offers liquidity at the expense of credit risk. Wholesale Digital Gold is presented as a third path.
“We believe there is a unique opportunity to reshape the current landscape by establishing a third foundational pillar for settlement of gold in the OTC market,” the WGC wrote.
They plan to address the ‘opportunity gap’ between the first two pillars by evolving gold as a financial asset, making it easier to transfer, enabling fractional ownership of gold bars, ensuring protection from the insolvency of the custodian, and allowing for more flexible use of gold as collateral. The collateral flexibility is of particular importance as various institutions have been boosting their gold reserves.
Price Watch: SPDR Gold Trust (NYSE:GLD) is up 33.71% year-to-date.
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