THE WORLD GOLD COUNCIL’S VISION FOR THE GOLD MARKET

By Chen Qinghan, Central Banks and Public Policy Lead, World Gold Council

As the leading market development organisation for the gold industry, the World Gold Council is committed to shaping the conversation around gold and improving understanding, access and trust for all stakeholders of the gold market.

The history of gold goes back many millennia, and given its historical connection with money, its role as a store of value has been established since antiquity. Notwithstanding the long history of gold, even today the gold industry is continually presented with new challenges in a rapidly evolving world.

Globally, digital transformation and heightened consumer and investor focus on Environmental, Social and Governance (ESG) issues have set new expectations and standards for how industries and businesses should operate. These transformations have impacted the gold industry as well. We at the World Gold Council welcome these changes, as they provide an opportunity and impetus for us to work towards a better future for gold.

In meeting these new challenges, we have a broad vision for the gold market, which is to improve integrity, accessibility and fungibility. In working towards this vision, we have various workstreams covering various aspects of the gold market. Below are some of our key focus areas and initiatives.

ARTISANAL AND SMALL-SCALE GOLD MINING (ASGM)

The World Gold Council and its member companies support the responsible mining and trading of gold from all legitimate sources, including artisanal and small-scale gold mining (ASGM).

Compared to large-scale mining operations, the great majority of ASGM takes place outside legal frameworks which makes it difficult to ensure best practices and standards. As a result of weak regulatory oversight, ASGM is sometimes associated with human and labour rights violations and the activities of organised criminal groups in some regions.

The World Gold Council recognises that government leadership is critical in formalising ASGM and in improving ASGM’s adherence to best practices in responsible mining and trading. We are currently working with a group of central banks, which actively purchase gold from domestic ASGM production, towards formalising the ASGM sector. Given the scale of their purchases, these central banks wield market power that can be used to foster lasting change through implementation of international standards and best practices.

Over two initial meetings in Paris and Vienna, the central banks involved agreed that the group would be a “trusted circle” where they can discuss best practices and learn from one another’s experiences. The World Gold Council is working with the group of central banks to finalise a set of common principles for central banks that purchase from domestic ASGM sources. The principles would require signatories to adhere to ESG best practices.

For our work with central banks in the ASGM field, the World Gold Council was awarded the Partner Initiative Award at the Central Banking Awards 2024.

As we continue to engage with and provide support for central banks, our vision is for central banks that purchase from domestic ASGM sources to exercise their market influence to foster a set of internationally recognised standards and best practices in ASGM.

GOLD BAR INTEGRITY PROGRAMME

The key to ensuring responsible gold sourcing and product integrity is the capability to ensure supply chain integrity. Recent developments in blockchain technology have put this within reach. The World Gold Council has partnered with the LBMA to develop and implement the Gold Bar Integrity (GBI) Programme, an international system of gold bar integrity.

Using distributed ledger (blockchain) technology, the programme aims to digitally monitor gold moving through the global supply chain by confirming provenance and providing transparency over the chain of custody. The goal is to expand the trusted, closed-loop ecosystem, which currently exists for the 400 oz gold bar market to also incorporate smaller bars, including kilobars. Over time, this will give consumers, investors and market participants increased confidence that their gold is authentic and has been responsibly produced and sourced.

For its pilot programme, the World Gold Council and LBMA brought together representatives from the global gold supply chain. The World Gold Council also made a strategic investment in aXedras, which will be the official service provider for the newly established GBI Database when it is launched later this year. The GBI Database aims to foster enhanced clarity, security, and stability in information-sharing across the market.

We envision that the GBI will provide consumers, investors, and market participants with greater confidence in gold as an asset class and advance standards for the common good of the global industry (see the entire value chain of the GBI below).

RETAIL GOLD INVESTMENT PRINCIPLES

For thousands of years, gold has been prized by cultures around the world as a means of accumulating and preserving wealth. Today, there are many ways to invest in gold. Besides bars, coins and jewellery, there are also products such as exchange-traded funds (ETFs).

Today, there are many ways to invest in gold. Besides bars, coins and jewellery, there are also products such as exchange-traded funds (ETFs).

While products such as ETFs are subject to financial market regulation, many other gold investment products are not. This makes it difficult for retail gold investors, particularly first-time gold investors, to feel confident about investing in gold. A consumer survey by the World Gold Council in 2019, covering 18,000 participants from the US, China, India, Russia, Germany, and Canada, highlights this issue. It shows that almost half of prospective retail gold investors cite lack of trust as a barrier to investing in gold.

To tackle this issue, in 2020 the World Gold Council launched the Retail Gold Investment Principles (RGIPs). Developed in consultation with 52 industry stakeholders from 16 countries, the RGIPs provide best practice principles for providers of all kinds of retail gold investment products.

Widespread adoption of these principles will foster the highest levels of fairness, transparency and integrity across the market so retail gold investors can feel confident when investing in gold. We believe that the retail gold industry will only fulfil its potential if it is trusted by investors. The RGIPs are now available in key markets like India, China, Singapore, Germany, and North America.

As we continue to collaborate with stakeholders in other markets to develop the RGIPs for their markets, it is envisaged that the adoption of the RGIPs will lead to greater trust, benefiting customers and product providers alike, and creating value and driving demand across the industry.

Technology and the future of gold

Gold has unique properties that make it critical in the technology sector. For example, gold is found in almost all high-end electronic devices, such as tablets and smartphones. With increasing electrification and consumer demand for electronic devices, gold’s unique properties will see it benefit from these macro trends.

But gold also has uses in lesser-known domains. Medical diagnostics is one of those fields. Gold in its bulk form is inert; it is unreactive from a chemical perspective. However, in increasingly small particles, this changes. This makes gold useful in nanotechnological applications such as lateral flow assays (LFAs). Billions of tests used around the world every year rely on gold nanoparticles, such as malaria, HIV-AIDs and COVID testing.

If you have used a COVID test before, you have been looking directly at gold probably without realising it. The purple line you were peering at were made up of millions of tiny gold nanoparticles. These types of tests are a crucial medical tool, offering quick, accurate and cost-effective diagnostics, and gold is a critical component.

The World Gold Council plays an active role in exploring the application of gold in the medical sphere. One example is our support for research at the University of Toronto, focused on developing new ways of treating brain tumours using gold nanoparticles as carriers for potentially lifesaving drugs.

Gold nanoparticles have also been shown to be a highly effective catalyst in the transformation of carbon dioxide (CO2) to carbon monoxide (CO), which has transformative potential in the field of climate change if it can be developed at scale. The World Gold Council is currently working with the National Research Council of Canada on a project exploring the possibility of taking carbon dioxide out of the atmosphere and turning that into carbon monoxide which can be turned into fuels.

The World Gold Council anticipates that the involvement of gold in technological applications will grow as technology advances, and we will continue to support projects and research that aim to harness gold’s unique and dynamic capabilities.

Building Singapore as global gold hub

China and India are the largest gold consumer markets in the world, while Southeast Asian economies have also seen significant growth. The rapid rise of Asia as the largest source of gold buying has moved the centre of gravity of the market, and this has created an opportunity for an international gold hub in Asia. The World Gold Council and the Singapore Bullion Market Association are currently working with local stakeholders to explore developing Singapore’s role in the global gold market.

This is an exciting initiative and forms an important part of the World Gold Council’s global vision for the gold market. We will no doubt meet with challenges along the way, and welcome the opportunity to work with various stakeholders towards this shared vision.

CHEN QINGHAN is responsible for engagement with central banks and sovereign wealth funds on topics relating to gold reserves management. She was previously an investment portfolio manager and worked on investment strategy and portfolio risk management, and worked in the Reserves and Investment division of the Singapore Ministry of Finance, responsible for monitoring asset allocation and investment returns, risk management and performance benchmarking.