World Gold Council to Trial Digital Gold in London Market

The World Gold Council is gearing up for a trial of digital gold representation in London, aiming to shake up one of the world’s oldest and most traditional financial markets.

This initiative will test pooled gold interests (PGIs) - essentially fractionalized digital claims on physical gold - within London’s massive $900 billion bullion trade. Success could fundamentally transform how gold is traded, settled, and used as collateral, dragging this ancient asset class into the modern era.

Digital Claims on Physical Gold

The proposed model would allow PGIs to represent co-ownership in gold held by London’s major clearing banks and trading houses in segregated accounts. Rather than moving whole bars around, participants could instantly transfer digital units, reducing settlement friction in the OTC market.

These interests would be structured through trusts and digitally recorded, enabling faster collateralization and potentially opening gold to repo and lending markets.

David Tait, the World Gold Council’s chief executive, believes this will transform investor perception of gold. “Investors view gold as static and non-yielding,” he noted. “Digitization could turn it into an income-generating asset, particularly for banks using it as collateral.”

Trading Tradition for Disruption

I see both opportunity and tension in this move to alter centuries-old processes in London’s gold market, which still largely clears trades through an opaque system of allocated and unallocated accounts.

The WGC has already experimented with blockchain through its Gold Bar Integrity program, launched with the London Bullion Market Association to track provenance and authenticity. While about 96% of refiners on the LBMA’s good delivery list have reportedly joined, implementation across the supply chain has crawled along at a snail’s pace.

Proponents argue digitization will help gold compete with cryptocurrencies and stablecoins that have offered liquid, blockchain-based alternatives to physical assets. With institutional demand for digital settlement growing, PGIs might bridge the gap between traditional bullion and emerging financial technologies.

Perfect Timing or Solution Seeking Problem?

This push coincides with record gold prices that have more than doubled in three years amid geopolitical uncertainty and aggressive central bank buying. The potential disruption to London’s OTC market, which clears $900 billion in gold trades annually, could be massive.

Some analysts believe expanding gold’s role as collateral could enhance liquidity in short-term funding markets and give investors more flexibility.

Not everyone in the bullion industry is convinced, though. Critics like Adrian Ash, research director at BullionVault, remain skeptical: “Gold is already the best performing asset class over the long run. This feels like a solution in search of a problem.”