The World Gold Council has launched a new framework to modernize gold trading, introducing a digital system designed to address what it calls an “opportunity gap” in the global gold market.

Traditionally, the gold market relied on two structures: allocated and unallocated gold, both carrying risks and operational challenges. 

Allocated gold provides holders with direct ownership of specific bars stored in vaults with a set serial number, but comes with higher costs and operation challenges. 

In contrast, unallocated gold has better liquidity, enabling simpler settlements but leaving holders exposed to credit risks of the institutions that manage their accounts. 

The council’s new proposal introduces a third option, called Pooled Gold Interests (PGIs), allowing investors to hold fractional shares of physical gold stored in vaults and transfer them more easily between parties.

The new mechanism has the efficiency of unallocated gold but offers greater security through direct backing by physical bars, the council said. 

The idea was developed following consultations with market participants and is aligned with the UK government’s Wholesale Financial Markets Digital Strategy. 

The Council said the principles could also be extended to other commodities, potentially reshaping how physical assets are traded and held in the global financial system.