WGC on its vision of the gold market

But over the past 18 months, there have also been some concerns: consumer demand for gold has been severely impacted by market closures, and logistical constraints at the start of the pandemic have led to a temporary disconnect between the New York and London markets. Although these problems were quickly overcome, many of them can be avoided in the future by taking advantage of the opportunities of the digital revolution.

Environmental, social and governance (ESG) issues have been the focus of investor attention for years, but Covid-19 has led to a renewed focus on sustainability and sustainability. The popularity of sustainable investment has risen for several reasons, including increased consumer and investor awareness, and because stable businesses are seen as better able to withstand external challenges such as pandemics.

A recent report from the Cicero Group found that 69% of people believe that environmental protection is becoming increasingly important after the pandemic. The same report says that nearly three quarters of respondents (73%) do not believe brands are transparent about their supply chains. Protecting the environment and enhancing the integrity of the supply chain have been two of the top priorities for the gold market over the years.

Opportunities for the digital revolution

We are on the cusp of the fourth industrial revolution. Advances in digital technology have an impact on all sectors of the economy and, in fact, on how we live.

And the gold market is not insured. For gold to continue to meet the needs and aspirations of people and investors in the 21st century, the market must take full advantage of the opportunities that new technologies provide. This is why the World Gold Council has formulated a broad vision of the gold market, with a focus on integrity, affordability and fungibility. This builds on the work they have collectively done so far and the use of the latest technological developments and innovations in the financial markets.

Improving the integrity of the gold supply chain

The gold industry is working hard to ensure that WGC practices are sustainable and, where possible, exceed expectations. The work to date includes the launch of the Responsible Gold Mining Principles (RGMP), which set out clear expectations for consumers, investors and the gold supply chain for what constitutes responsible gold mining. RGMPs recognize and integrate existing standards such as the UN Guidelines, OECD Due Diligence Guidelines and ICMM Expected Results into a single framework. This raises awareness of how gold producers are meeting ESG expectations and improves reporting.

Other areas of work include analyzing the carbon footprint of the gold mining industry and raising awareness of how the industry contributes to the achievement of the UN Sustainable Development Goals.

Last year, the World Gold Council launched the Retail Gold Investment Guidelines. They are intended to increase confidence in the retail gold market, which accounts for $ 50 billion annually. Trust is a major impediment to sector growth, and the Principles are designed to enhance the integrity of the retail market through more robust best practices, covering everything from responsible business to transparency.

One area where a global industry solution is required is supply chain integrity. A general agreement is needed for a single system to track the sources of all forms of gold, including kilobars, throughout the supply chain. It is necessary to rely on existing standards to develop a global solution for the entire market. While the Council has high standards for responsible gold prospecting, there is an opportunity to use new technological developments to create a truly global supply chain integrity system that encompasses gold in all its forms.

Guaranteed origin and integrity:

  • Universal Ethical Standards for Sourcing, ESG;
  • Gold bar protection technology applied throughout the supply chain;
  • Large ecosystems of good delivery of gold;
  • Dear compliant intermediaries, incl. not involved in financial crimes.

Available to everyone:

  • Access 24/7, anywhere, for everyone;
  • Convenience of customer service;
  • Full transparency for investors regarding price, costs, volumes and liquidity;
  • Clear market methods, documented, well understood by market participants.

Fully interchangeable:

  • Access 24/7, anywhere, for everyone;
  • The trading unit for gold, bar and brand independent;
  • Property ledgers are processed instantly;
  • Deposit or withdrawal of physical gold anywhere in the world;
  • Gold can be used as an asset in the financial system.

Ensuring universal access to gold

The second priority for the gold market should be to maximize the availability of gold. Consumers, investors and end-users of gold should be able to trade seamlessly and trade 24 hours a day at the best price. The WGC has already worked to expand access by supporting the creation of new marketplaces in India or acting as a catalyst for new product development in China, India and Japan. The gold market can benefit from the digital finance revolution by developing a global market infrastructure that facilitates access to physical gold through online or digital platforms.

Gold is an extremely important household financial asset in many markets, especially in Southeast Asia. The model of buying physical gold in a jewelry store will still exist, but work needs to be done to facilitate the development of new channels of access. It is the key to the success of gold, which plays an optimal role in the personal finances of young, tech-savvy consumers.

Ensuring the fungibility of gold

Finally, hand in hand with accessibility, an important point is the complete interchangeability of gold. This means that the World Gold Council must work to reduce fragmentation and ensure that local and regional gold markets are fully compatible. Through a combination of harmonized standards, smart regulation and technology, it should be possible to use gold in the global financial system, including depositing or withdrawing gold on a network of global outlets.

This would be beneficial for several reasons, not least to build trust through transparency and legal certainty, and to expand market participation through increased liquidity, new use cases and lower trading costs across all markets.

Diverse market

All of this can be achieved through a common agreement on standards, technologies and norms. The gold market is global and diverse. Different forms of gold meet the different needs and preferences of consumers, investors and end users.

But to be successful in realizing this vision, the entire supply chain must come together to develop an interoperable and consistent solution to the challenges of the 21st century and the opportunities the digital revolution presents us with.

Posted by Andrew Naylor | Translation: Gold Reserve

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