How Would Digitizing Global Supply Chain of Gold Bars Affect Investors?

Stack of Pure gold bars on black background.
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The World Gold Council (WGC) and London Bullion Market Association (LBMA) have announced an economic collaboration aimed at digitizing the global gold supply chain — instilling more confidence in the product’s provenance while removing fraudulent bars, all thanks to blockchain technology.

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As such, the newly minted Gold Bar Integrity Program will support greater industry alignment to ensure the future growth of the international gold market. The program would ostensibly provide an international system of gold bar integrity focused on chain of custody and provenance, the organizations said. Over time, the program may help consumers, investors, and market participants to trust that their gold is genuine as well as having been responsibly and sustainably sourced.

David Tait, CEO of World Gold Council, told GOBankingRates that the Gold Bar Integrity Program is about developing and implementing a global, transparent ledger and database of gold bars.

“Blockchain is the technology that the gold industry needs to turn our ambitions into reality,” Tait said.

Tait explained that for investors, this new database will mean fraudulent and misrepresented bars are gradually removed from the system — giving buyers (and sellers) confidence that their gold is genuine.

“It will go further than that, helping all market participants to know where their gold has come from and that it has been responsibly sourced. Ultimately, I believe this will help tackle barriers to investment and improve participation in the gold market,” he added.

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This initial phase will see two distributed ledger companies — aXedras and Peer Ledger — demonstrate how blockchain can best deliver a global ecosystem that will create an immutable record of a gold bar’s place of origin and chain of custody. This blockchain-backed ledger will register and track bars, capturing the provenance and full transaction history.

“For over a year, we’ve been working in partnership with the LBMA to unite the supply chain and we’ve had an overwhelmingly positive response from the global gold industry,” Tait said, adding that for the pilot phase of this program, “we have major players raising their hands to participate.”

Tait added that said players include miners from the WGC membership — such as Barrick Gold Corporation, Newcrest Mining Limited and Newmont Corporation.

“We have prominent participants from across the global value chain such as Brinks, Rand Refinery, CME Group, The Perth Mint, and Pro Aurum taking part. Once the pilot phase is complete, I am confident we will see more and more organizations sign up to the program,” he said.

The WGC hopes to complete the pilot phase this year, and will then formally appoint one of the two distributed ledger companies taking part in the pilot to expand the database to the whole supply chain, he said.

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According to Tait, the Gold Bar Integrity Program will address a number of challenges in the industry – perhaps most importantly, provenance and transparency.

“But for me, the key problem we will solve is trust,” he said. “I believe that improving trust amongst the investor community is paramount to unlocking demand for gold. And we won’t stop there.”

He added that “this is where Gold 24/7 comes in” — a project concerned with the WGC’s three main ambitions to improve accessibility, fungibility and transparency / integrity in the gold market.

The launch of the integrity program is the critical, foundational work that needs to be embedded in the industry so to move the asset class forward, Tait said.

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“The industry is now working together on integrity which opens the door to the future, where we will create more fungible markets that are accessible and relevant to a broader investment audience,” he concluded.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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