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Gold is a pretty weird asset. On the one hand, it isn’t used up like oil or grains, so it doesn’t deal with the same supply issues you see in those industries. This is because once gold is mined, it just stays in the world, whether it’s in an electronic device or in jewelry, it just stays. This means the whole supply/demand system doesn’t work quite the same for this precious metal. The supply of gold will only go up even if demand goes down. But at the same time, it doesn’t work like a fiat currency either (or, at least, it hasn’t for quite some time). And considering how old it is as a valuable commodity, a lot of the systems for trading gold are just as ancient.
But, the head of the World Gold Council, former investment banker David Tait, has a plan to modernize the gold market. First, he wants to create a blockchain database to keep tabs on all of the gold in the world. The idea here is that you’d have better transparency from mining to refining to banks, so the likelihood of fraud goes down, and the integrity of the material stays strong.
Then, once you have that database, you can make tokens that correspond to gold around the world. So, instead of buying a gold bar that exists physically in a vault in London, you could buy a token that corresponds to its value without dealing with the complications of handling physical gold. This makes it way easier (and cheaper) to trade the precious metal.
The idea has critics, though. Some people point out that the whole point of buying the metal is that there’s a solid gold bar somewhere that you own, and if you’re buying a token, you don’t have an easy way to correlate the physical thing with the token. On top of that, you need to get all the major players on board, from Wall Street to London to Hong Kong.
But ultimately, people in the industry acknowledge the shortcomings of how gold is traded now. It isn’t that no one wants to change – it’s just that it will be a messy process.