Gold has long been considered a core monetary asset, but a large amount of gold remains idle as book assets, failing to realize its full financial value. At the London Bullion Market Association's annual Global Precious Metals Conference, industry experts suggested that tokenization of precious metals could improve the efficiency of gold asset utilization and attract more capital into the precious metals sector. Vincent Domien, head of precious metals trading at Standard Bank, stated during a panel discussion that although current institutional investor demand for tokenized gold is relatively low, a significant improvement in the efficiency of gold asset utilization could lead to a substantial shift in the market landscape. He stated, "With gold prices continuing to rise, I believe the most prominent issue is that this batch of gold on balance sheets is completely idle, unable to create any value for its holders."

Activating Existing Gold Reserves: Tokenization Simplifies Staking Process

Vincent Domian explained that while physical gold can already be used as collateral, the entire process is cumbersome and subject to constraints such as restrictions on gold storage locations and high collateral discount rates. With tokenization technology, gold is expected to be easily transferable, and institutional investors can use their gold holdings as collateral for swap transactions or to meet margin requirements. He stated, "If gold can be tokenized, all participants can instantly access this asset, and its use value will increase dramatically. What we need to consider is how to make these dormant gold assets, lying on balance sheets without generating any output, play a role." Mike Oswin, Global Head of Market Structure and Innovation at the World Gold Council, said that activating these dormant gold assets could release billions of dollars in new collateral to the financial markets. Increased efficiency in the use of gold assets will ultimately translate into increased market demand. James Willis, Global Head of Precious Metals Sales at HSBC, believes that mature digital gold products will drive up gold holdings, prompting investors and institutions to trade and utilize precious metals more frequently. Qualified tokens are backed by physical gold bars, and as market acceptance increases, they will further drive demand for physical gold storage. He stated, "If our product development efforts are successful, creating a market product that expands the application scenarios of gold and has practical value, it will be beneficial to our business. At that time, the scale of gold holdings will increase, and market participants will trade and use gold more frequently."

Opening up new market space for ordinary investors

Tokenization can also enhance gold's appeal to retail investors. James Willis cited HSBC's digital gold token launch in Hong Kong as an example, noting that the product attracted many new customers, even those who could already purchase physical gold bars, gold ETFs, and paper gold products. The ease of token purchase and transfer attracted ordinary consumers who were not previously interested in traditional gold investment products. Mike Oswin stated that the World Gold Council estimates the retail investment asset size to be between $6 trillion and $7 trillion, while the retail gold storage and token market is only about $50 billion to $60 billion, indicating huge growth potential in this sector. He added that gold has a unique advantage in the asset tokenization wave. Many financial assets are already in electronic form, while gold is a physical asset stored in vaults. The core challenge for the industry is to leverage digital infrastructure to unlock the value of this physical wealth. He said, "Gold is a physical asset, stored in vaults, and requires continuous management. Our current efforts to unlock the value of this type of physical asset through technological innovation are of great significance."

The bottom line is unwavering: trust is the core foundation of gold.

Experts at the meeting emphasized that the tokenization of gold must not compromise its core characteristic—credit. Any digital gold certificate must be backed by physical gold, requiring a reliable custodian, clear legal ownership, and unified industry standards. James Chapman, Director of Consulting at Hilltop, stated that holders must be certain that the digital asset corresponds to real gold and that they possess legally enforceable ownership of the gold. The World Gold Council is advancing a wholesale digital gold project, integrating the advantages of both book-entry and non-book-entry gold bars. The project aims to retain the legal certainty and asset ownership associated with book-entry gold bars while adding asset splitting, rapid transfer, and settlement capabilities. James Chapman stated that the project is not intended to replace the existing gold market, but rather to build a complementary solution, forming a third path for holding, transferring, and settling gold bars. Vincent Domian mentioned that investors can go long on gold through ETFs or tokens, but the operational possibilities after holding these two types of assets differ significantly. He stated, "Both methods can achieve long positions in gold, but the uses they can achieve after acquiring the asset are different."

Conclusion

In conclusion, gold tokenization is not simply about digitizing gold, but rather about unlocking the financial value of dormant gold through technological means, while also catering to the needs of both institutional and individual investors. However, this innovation cannot be divorced from the underlying support of physical gold; only by upholding the fundamental principle of asset credibility can tokenized gold hope to open up entirely new market opportunities.