Highlights:

• The World Gold Council (WGC) has proposed launching Pooled Gold Interest tokens, digital assets backed by physical bars stored in London vaults.

• The initiative aims to expand access, enable fractional ownership, and make gold usable as financial collateral.

• While the WGC sees transformative potential, skeptics warn digitalization could undermine the very appeal of gold as a tangible store of value.

London’s $930 billion gold market could be on the cusp of a historic transformation. The World Gold Council has unveiled a plan to digitalize gold trading by introducing tokens tied directly to physical bars in the city’s vaults, a move that could change the way investors use and interact with the world’s most enduring safe-haven asset.

A Third Pillar for Gold Trading

Today, gold transactions are largely confined to allocated and unallocated markets. Allocated gold provides direct ownership of specific bars, while unallocated gold represents a claim without guaranteed delivery, leaving investors exposed to the credit risk of the holding institution. The proposed Pooled Gold Interest (PGI) tokens would form what the WGC calls “a third pillar,” combining the accessibility of digital finance with the security of physical backing.

By offering fractional ownership of London’s 400-ounce bars, PGIs could lower the barrier to entry for traders and institutional investors, while also making gold far more versatile as collateral. “We want to place gold alongside cash and bonds as a fluid financial asset,” said Mike Oswin, the WGC’s global head of market structure and innovation.

The Collateral Opportunity

A central objective of the initiative is to position digital gold as a readily pledgeable asset in capital markets. While allocated gold is technically eligible as collateral, the logistics of shifting physical bars between vaults has meant it is rarely used in practice. PGIs, Oswin explained, would overcome this hurdle by allowing a digital representation of vaulted gold to move seamlessly across financial institutions.

This innovation could reshape risk management practices. Banks and asset managers could use tokenized gold in repo transactions, derivatives margining, or interbank lending, giving the metal a liquidity profile it has never enjoyed. If widely adopted, the tokens might also reduce reliance on cash collateral, especially during periods of monetary tightening when liquidity premiums rise.

Skepticism Among Traditionalists

Yet enthusiasm is far from universal. For committed gold investors, the allure of the asset lies in its tangible, immutable qualities. Russ Mould, investment director at AJ Bell, suggested that digital gold may alienate “real gold bugs,” who value the physical scarcity and simplicity of bullion precisely because it stands outside the complexities of modern finance.

“The WGC may see this as essential for relevance in a digital era, but many investors view gold as protection against the very financial engineering tokenization represents,” Mould noted. The risk is that PGIs are perceived as diluting the asset’s safe-haven status, especially for those seeking refuge from leverage and opacity.

Global Implications and Next Steps

The London market, clearing some 20 million ounces a day, is the first target for the rollout, but the WGC has global ambitions. In its white paper, the group described the initiative as “a unique opportunity to reshape the current landscape,” with future expansion to the U.S. and Asia firmly in sight.

If adopted, PGIs could redefine gold’s role in financial markets, merging the world of physical assets with digital infrastructure. But success will hinge on whether institutional players embrace tokenization—and whether traditional investors accept that gold can remain a hedge against uncertainty even when expressed in digital form.

As volatility and geopolitical tensions keep demand for bullion elevated, the coming months will reveal whether digital gold is a fleeting experiment or the foundation of a new global standard in precious metals trading.