Highlights

1. The World Gold Council has put forward a proposal to create digital tokens, called Pooled Gold Interests (PGIs), backed by physical gold held in London’s vaults.
2. This initiative aims to modernize the market by making gold a more liquid and easily transferable financial asset, primarily for use as collateral.
3. The move could significantly increase accessibility and participation in the nearly trillion-dollar London gold market by allowing for fractional ownership of large bars.
4. However, some analysts caution that digitalizing the precious metal could alienate traditional investors who are drawn to its physical nature as a hedge against financial complexity.

The historic, physically-settled London gold market is facing a potential digital revolution. A new proposal from the World Gold Council (WGC) aims to tokenize vaulted bullion, a move touted by the industry body as a way to unlock liquidity and modernize trading. This initiative, however, has sparked a debate about the very nature of gold’s allure as a safe-haven asset, pitting the promise of financial innovation against centuries of tradition.

Introducing a ‘Third Pillar’ for Gold Trading

The WGC’s proposal centers on creating tradeable digital tokens—Pooled Gold Interests (PGIs)—that would give holders legally enforceable ownership of physical 400-ounce gold bars stored in London’s vaults. According to the council, this would establish a “third pillar” in gold trading, solving a long-standing dilemma for investors. Currently, market participants must choose between “allocated” gold (direct ownership of specific bars, which is secure but difficult to transfer) and “unallocated” gold (a claim on a quantity of gold, which is liquid but carries institutional credit risk). The PGI tokens aim to offer the best of both worlds: the legal security of allocated gold combined with the seamless mobility of a digital asset.

Unlocking Liquidity and New Use Cases

The primary objective of this proposal is to transform gold into a more dynamic and usable form of financial collateral. While allocated gold is accepted as collateral in theory, the logistical challenges of physically moving bars between vaults mean it is rarely used in practice, with investors favoring bonds or cash. The WGC argues that by digitalizing the ownership record, pledging gold as collateral would become as simple as pledging a bond. This innovation could also democratize access to the wholesale market by allowing investors, for the first time, to buy and own fractions of the large 400-ounce bars. The WGC’s ambition is global, with plans to eventually explore how the system could work in the U.S. and other jurisdictions.

A Challenge to the ‘Gold Bug’ Mentality?

Despite the potential benefits of increased efficiency and liquidity, the proposal may face a lukewarm reception from some of gold’s most dedicated investors. Critics, like Russ Mould of AJ Bell, argue that the core appeal for “gold bugs” is precisely that it is a physical asset—a tangible hedge against the very financial complexity, opacity, and leverage that a digital token represents. For these investors, gold’s value lies in its simplicity and its separation from a financial system where money can be created at the push of a button. From this perspective, attempting to integrate gold more deeply into the digital financial architecture could be seen as diluting its fundamental purpose as a safe haven.

The Future of a Precious Metal

The World Gold Council’s proposal is a bold step to bring the world’s oldest financial asset into the modern digital ecosystem. The potential to enhance liquidity and expand gold’s utility as a core financial instrument is undeniable. However, the ultimate success of this initiative may hinge on a crucial psychological question: can gold be modernized without losing the very physical attributes that have made it a trusted store of value for centuries? The market’s response will likely determine the future of trading in London’s historic vaults.