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World Gold Council has plan to dematerialize gold market even more
A Digital Drive to Reform the $11 Trillion Global Gold Market
By Eddie Spence and Ranjeetha Pakiam
Bloomberg News
Sunday, October 16, 2022
Trading on one of the world's oldest markets depends on a network of high-security vaults located underneath Greater London. There, some 50,000 gold bars, each worth more than $650,000, change hands every day among the four big banks in charge of processing transactions.
The system, which includes some $500 billion worth of gold stored in locations, has been trundling along with little change for most of the past two decades. David Tait, who heads the World Gold Council, the main lobby group for miners of the metal, thinks it's time for an overhaul.
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The former investment banker is trying to push through changes he hopes will significantly increase demand, including a database using blockchain technology to keep track of almost every gold bar in the world. Once that's up and running, he says, it should be possible to create a digital token backed by physical gold that can be more easily traded.
Market players gathering for a conference on Oct. 16 are skeptical the proposed overhaul will get off the ground, because previous attempts to make even small changes to the market have fallen flat. But the package of changes, dubbed Gold 247 (for 24/7), has taken on fresh urgency. Post-financial crisis banking reforms began to affect gold this year after market participants were unable to prove that the asset could easily be traded in stressful times.
The new rules, in effect, made it more expensive for banks to hold bullion, compressing the already meager returns they make trading the commodity, and raising concerns the market will shrink. And in the past decade, gold has faced growing competition from cryptocurrencies for the attention of investors looking for alternatives to stocks, bonds, and cash—with some boosters even calling Bitcoin "digital gold." ...
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