Digital gold is here—Is the $930 billion London gold market about to change?
Despite the association's efforts to activate "dormant" assets, traditional gold enthusiasts question whether digitalization deviates from gold's fundamental role as a safe haven.
The World Gold Council has launched a groundbreaking digital token backed by physical gold, called PGI, aiming to bring the traditional London gold market into the digital era. This innovation allows investors to hold fractional interests in standard gold bars, making gold as convenient as bonds for trading, settlement, and collateralization, targeting the trillion-dollar global collateral market. Although the Council seeks to activate "dormant" assets, traditional gold believers question whether digitalization deviates from gold's essence as a safe haven.
Written by: Long Yue
Source: Wallstreetcn
The ancient gold market is undergoing a profound digital transformation.
This Wednesday, the World Gold Council, the representative body of the global gold industry, officially proposed a disruptive initiative to launch a digital token backed by physical gold in London, aiming to fundamentally change the way gold is traded, settled, and used as collateral. This move could inject new vitality into the world's largest physical gold trading center, valued at $930 billions, but has also sparked intense debate about the clash between tradition and innovation.
Unlocking "Dormant" Assets, Targeting the Trillion-Dollar Collateral Market
For a long time, gold has played a static, non-yielding role as a store of value on the balance sheets of banks and investors. According to World Gold Council CEO David Tait, as told to the Financial Times, gold must be digitized to expand its market reach.
The core of this launch is a digital token called "Pooled Gold Interest" (PGI). According to Mike Oswin, Global Head of Market Structure and Innovation at the World Gold Council, speaking to CNBC, each PGI token will represent legal ownership of specific physical gold in London vaults, and for the first time, investors will be able to trade fractional ownership of standard 400-ounce gold bars.
"We want to position gold as a financial asset on par with those digitally native bonds or cash," Oswin stated in an interview. "(With PGI) pledging gold will become as simple as pledging bonds."
The core goal of this initiative is to activate the liquidity of gold as financial collateral, making it easy to use for meeting margin requirements and thus entering the vast global collateral market.
The "Third Pillar": Reshaping the London Trading Landscape?
Currently, the London over-the-counter gold market (Loco London) mainly operates with two trading models: "Allocated Gold," which means ownership of specific gold bars; and "Unallocated Gold," which means a claim to a certain amount of gold—this is the most common form of global trading, but investors bear the institution's credit risk.
The launch of PGI is seen by the World Gold Council as building the "third pillar" of market trading. According to data from the World Gold Council, as of June 30 this year, the total amount of gold stored in London vaults was 8,776 tons, valued at $927.5 billions.
Oswin is optimistic, stating that PGI could even serve as a physical settlement mechanism for gold futures contracts in the future, and its ambitions are not limited to the UK. "We are also exploring how to roll this out in the US and other jurisdictions."
Revolution or Gimmick? Market Doubts Remain
However, this grand blueprint is not without resistance. The market's response has been polarized.
"True gold believers may not care at all, or may even be wary," said Russ Mould, Investment Director at AJ Bell, in an interview. He believes the core appeal of gold lies in its physical tangibility, serving as "a tool to counter financial complexity, opacity, and leverage," and that digitalization may reintroduce these very risks.
This skepticism is not unique. Adrian Ash, Research Director at gold trading platform BullionVault, commented even more sharply, "This seems like a solution in search of a problem that doesn't exist."
The market's cautious attitude stems from the fact that the gold market is dominated by highly traditional and risk-averse participants. Previously, the World Gold Council and the London Bullion Market Association (LBMA) jointly launched the blockchain database "Gold Bar Integrity Program," but its adoption in the market has been relatively slow, casting uncertainty over the future of PGI. Whether it will be a disruptive industry revolution or another attempt that garners applause but not adoption remains to be seen by the market.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Australia Unemployment Rate set to remain at a five-year high of 4.6% in September
Blackstone's AirTrunk Postpones $1.5 Billion REIT IPO: Yield Raised to 6% but No Takers, AI Infrastructure Financing Faces 5.2% US Treasury Yield
AirTrunk, a data center operator under Blackstone, has decided to postpone the listing of its $1.5 billion Singapore Real Estate Investment Trust (REIT) to the first or second quarter of 2027. Rising U.S. Treasury yields and increased market volatility have made investors more cautious; even raising the yield from 5.5% to around 6% has not boosted demand. High capital costs are becoming a major constraint on the expansion of AI infrastructure.
CoreWeave Faces Dual Shock in Stocks and Bonds! Share Price Plummets 15%, Bonds in Trouble, Musk Exclaims "Scary"
Analysts point out that the company borrows at an interest rate of about 9%, but its investment returns are less than 5%. With total debt and lease obligations amounting to $52 billion, there is a risk that its equity value could go to zero. Rising inflation has pushed up long-term U.S. Treasury yields, leading to systemic doubts about the financing logic of capital-intensive AI companies. Prediction platforms now estimate the company's probability of bankruptcy before 2027 at 17%.
Federal Reserve Beige Book Warns of "Fierce" Oil Prices: Half of Districts Face Strong or Intensifying Price Pressures, Businesses Confront Price Increases and Profit Squeeze
The Beige Book shows that all 12 Federal Reserve districts reported the impact of rising oil prices. Businesses generally indicated that high diesel prices and fuel surcharges are passing additional costs down the entire supply chain. Since the previous Beige Book report just over a month ago, the U.S. economy has experienced moderate growth, with manufacturing serving as the main support. The labor market continues to see low hiring and low layoffs, and firms in nearly half the districts reported that AI investment is impacting employment.
Crypto prices
More
