Gold Changes Its Format

#XAUUSD

Key zone: 3,450.00 - 3,550.00

Buy: 3,500.00 (on a pullback after a correction); target 3,650.00; StopLoss 3,420.00

Sell: 3,420.00 (after a strong breakdown of 3.450); target 3,250.00; StopLoss 3,500.00

A project created by the World Gold Council is launching a digital market version of the precious metal. This step could permanently change London’s $900 billion physical gold market, as it introduces a new format for trading, settlements, and bullion backing.

Reminder:

The London bullion market “Loco” is the world’s largest center for physical gold trading, relying on the significant assets of commercial banks such as HSBC and JPMorgan, as well as the Bank of England’s storage capacity. Transactions are carried out over-the-counter, directly between parties rather than through a central clearinghouse.

There are two types of transactions on this market: allocated gold trades (specific bullion bars are sold) and unallocated gold trades (a certain amount of gold without specific bars). Now, the WGC will create a third type of OTC gold transaction.

Investors value traditional gold for its physical form and lack of counterparty risk. However, the new format will allow the metal to be “used” as digital collateral within the gold ecosystem. Tokenizing bullion will expand the trading range so that financial products used in other markets can also be applied to gold trading in the future.

All attempts to create gold-backed stablecoins have failed. Two relatively successful tokens, Tether Gold and Pax Gold, manage assets worth about $1.3 billion and $1 billion respectively, a very small fraction of the $400 billion total gold held in ETFs.

The new proposed digital unit is PGIs – “pooled gold interests,” which will allow banks and private investors to buy/sell ownership rights to physical gold stored in segregated accounts. The system will be tested with commercial participants in London in the first quarter of next year.

However, some market participants suggest these efforts may face resistance, as the gold market is dominated by major players reluctant to take risks.

Over the past three years, gold has doubled in price. At the moment, the price is holding steadily above $3500, and the $3600–3650 zone looks realistic. Still, market sentiment remains cautious. The fundamental backdrop is moderately negative. A technical correction is badly needed, although there are no signals yet of a reversal in the bullish trend.

So we act wisely and avoid unnecessary risks.

Profits to y’all!