Gold is back.
Big time.
Huge interest from both retail and institutional investors pushed gold prices to a new record high above US$2,800 in October before easing slightly.
During the September quarter, demand for the precious metal tipped about US$100 billion for the first time, according to peak industry body, the World Gold Council (WGC).
In a statement, Louise Street, WGC senior markets analyst, said the “FOMO factor”, or fear-of-missing-out, underpinned much of the gold price action in the quarter.
“Investors have shown an appetite to buy into the price momentum, are encouraged by the prospect of future interest rate decreases, and are also considering gold’s role as a safe haven in the face of US political uncertainty and escalating conflicts in the Middle East,” Street said.
Year-on-year gold demand more than doubled, according to the WGC, with particularly strong flows into exchange-traded funds (ETFs) linked to the asset class.
Even NZ now has a listed gold ETF after the NZX-owned investment house, Smart, badged a BlackRock iShares product in October: the local version of the fund reported about $2.3 million under management as at early November.
“Looking ahead, the step-change in gold investment flows is a trend that is likely to continue, which could keep both demand and price levels elevated,” Street said. “On the other hand, we’ve seen over 30 record price highs in 2024, and that environment will continue to be challenging for consumers. However, the prospect of economic growth is another factor we will be watching that could tip the scales.”
But whatever the immediate direction of the spot price or global demand, the WGC is looking to bring the somewhat antiquated gold trading markets into the modern era while also upgrading its environmental, social and governance (ESG) credentials.
Terry Heymann, who serves as both CFO and ESG head for the WGC, said the global industry body is one to two years away from launching a new blockchain-based platform set to alchemise the leaden trading infrastructure into a tokenised fungible gold digital format.
Heymann said the WGC Gold247 project passed a new milestone this October in a successful pilot by blockchain specialist firm, Digital Asset, tokenising gold along with UK and European government bonds.
At the time, Mike Oswin, WGC global head of market structure and innovation, said in a release: “By digitizing gold, we can overcome the perceived restrictions on moving and storing the physical metal, enabling this high-quality asset to be mobilized and used seamlessly within financial markets.”
According to Heymann, tokenisation should bring efficiencies to current institutional gold processes such as collateralisation and lending while opening up avenues for new retail products including ETFs.
He said while Gold247 might be a couple of years away, the first step in the digitisation process is primed to reach launch phase in January next year.
The Gold Bar Integrity Programme, a joint venture between the WGC and the London Bullion Market Association, will create a blockchain-based “digital record of gold will help consumers, investors, and market participants gain more trust that their gold is genuine and has been responsibly and sustainably sourced” with Swiss IT firm, aXedras, providing the technology.
All 32 members of the WGC, which cover most of the world’s largest gold mining operators (including OceanaGold that has a strong presence in NZ), have signed on to the integrity database, Heymann said.
Once in place, the system would provide an extra level of ESG assurance for gold investors, he said.
WGC members must follow strict ‘clean’ mining protocols, Heymann said, that include best-practice environmental and labour standards as well as commitments to support communities affected by their activities.
And more recently, the gold body joined up with three other mining industry groups – the Copper Mark, ICMM and the Mining Association of Canada’s Towards Sustainable Mining – to develop a common set of standards.
If adopted, the Consolidated Mining Standard Initiative (CMSI) would see many of the hole-digging industries follow a single rule-book to govern behaviour around biodiversity management, labour rights and supply chain sourcing.
In Australia last week to present at the International Mining and Resources Conference about the CMSI, Heymann said gold has another quality that lifts its sustainability kudos above other commodities.
Gold, he said, is infinitely recyclable.
“No one ever throws gold away.”