Core Viewpoint - The World Gold Council (WGC) plans to introduce a digital form of gold, potentially revolutionizing the $900 billion London physical gold market by enabling new methods of trading, settlement, and collateralization [1][2]. Group 1: Digital Gold Initiative - The new digital gold initiative aims to allow gold to circulate digitally within the ecosystem and be used as collateral [1]. - The concept of "pooled gold interests" (PGIs) will enable banks and investors to buy and sell partial ownership of physical gold stored in independent accounts [2]. - The pilot program for this model is set to involve commercial institutions in London in the first quarter of next year [2]. Group 2: Market Context and Competition - Despite the recent surge in gold prices, which have doubled in value over the past three years, gold remains a low-yield, illiquid asset on many banks' balance sheets [1]. - The introduction of digital gold is seen as a way to enhance liquidity and generate returns by allowing gold to meet margin requirements and serve as collateral [1][2]. - The digital gold initiative faces competition from cryptocurrencies and stablecoins that are pegged to traditional assets [2][3]. Group 3: Existing Market Structure - The London gold market is the largest physical gold trading center globally, supported by major banks like HSBC and JPMorgan, and operates on an over-the-counter (OTC) basis [3]. - The current trading structure includes "allocated gold" (specific bars) and "unallocated gold" (quantity without specific bars), with the WGC's proposal introducing a third type of trading [3]. Group 4: Challenges and Industry Response - Some market participants express skepticism about the adoption of the new digital model, citing the existing institutions' dominance and risk-averse nature [4]. - The London Bullion Market Association (LBMA) and WGC have previously launched a blockchain database to enhance transparency and verify gold sources, although its adoption has been slow [5]. - The WGC remains optimistic about the long-term impact of the blockchain database on gold procurement practices [5].