What motivated you to join the gold industry and what vision do you have for the World Gold Council?
I have spent 35 years in investment banking. In 2015, I was finding that out of the risk rated assets I was given to trade, the worst performing were commodities.. Now, in a peculiar and complete circle, I am “playing for the other team”, trying to fix the very reasons that made me shut down that desk eight years ago. I began the reconstruction journey of the World Gold Council by setting the organization up into three main pillars: sales, research, and marketing; standards; and government research and market structure. The World Gold Council’s membership is comprised of 33 of the largest gold mines in the world. . Once I took over, I saw an opportunity to influence the entire value chain, given that the OTC markets were very disjointed and old fashioned, and there was a high degree of lack of trust throughout the industry, both at the retail and institutional level. Additionally, there was no overarching governance structure, and no regulator to keep in place the capital cost of commodities.
Quite a journey to fix everything, then – which are some concrete changes you have implemented and have they started bearing fruit?
First and foremost, together with The London Bullion Market Association, we set out to achieve Gold Bar Integrity (GBI) to solve the underlying trust issues. Over the course of a couple of years, we consulted with the entire industry, and set up a database which we launched in March last year. Singapore’s Bullion Market Association, the International Indian Bullion Exchange, Shanghai Gold Exchange, UAE authorities, and other global entities have shown interest in the database. There are already a dozen clients on system, two of the major refineries, , all 33 WGC member companies, and we hope it will include more members over time, given that its goal is to create a first-time-in-history bullet proof database for all good and accredited gold. With the market for unaccredited gold shrinking, the benefit should be that nefarious practices will slowly decline, and criminal gangs exploiting artisanal mines and abusive child labor become vestiges of the past.
Furthermore, we aim to create accessibility to gold and fungible markets, with the goal to make the whole process transparent, standardized, and extremely easy to use. As a way to solve this, we have come up with a Standard Digital Gold Unit, so that all the gold which sits within the GBI could be converted and redeemed into and out of this digital melting pot. That is not a traded unit, but the source code and the DNA of all future financial products that could be created from gold.
To what extent now, in 2023, when there is so much awareness, are the unethical mining problems you touched upon truly being addressed?
When I joined the industry, I had the same degree of skepticism, but when I visited the DRC and saw roads, schools, hospitals, banks, and football fields built by mining companies, from a moral perspective, I have been nothing but impressed. In 2021, miners contributed $57 billion to host countries, with most locals being employed on the mining sites. Consequently, we are focusing on value distribution, trying to raise awareness about the positive impact of large-scale gold mining in local communities.
We are using all tools available, including producing video content, like The Golden Thread, and an upcoming documentary on modern gold mining, fronted by a Hollywood A-lister.
Demand for gold dropped by 13% in the first quarter of this year – where to from here, and who do you believe will keep demand steady for one of the world’s traditional investment safe havens?
Indeed, it is a slightly calmer scenario, but demand for gold in Q1 was a record figure for a first quarter and down only against exceptional demand in 2022. Over this last quarter we have seen central banks in developing markets persistently buying gold, showing a high degree of pragmatism in light of geopolitical turmoil.
Looking forward, digitalization will be important. The world's tolerance for debt is at a breaking point in the aftermath of the pandemic, and considering the current energy crisis, digitalizing gold can remove barriers for institutional investors. It would amount to a completely regulated and transparent market, where all the risk factors drift away, and gold can be considered a high-quality liquid asset.
Four years ago, together with the Precious Metals Working Group, of the Financial Markets Standards Board (FMSB) we put together three documents meant to address reforms and market structure, solve all post-trade issues (including clearing), and address data and transparency. By agreeing to the second chapter, the banks have signaled their commitment to a digitalized future of the gold market. Alongside that, the World Gold Council is investigating the viability of a Standard Gold Digital Unit because it is our responsibility to look at the whole chain and create an ecosystem easy enough to use that everybody wants to play. The gold mining industry has never been more focused on responsible sourcing and production. Today, mining companies are very keen on complying to the Responsible Gold Mining principles that the World Gold Council set up, for not only commercial, but also moral reasons.
