The future of gold investment is on chain

Gold’s role in investment has undergone several shifts over the years. The SPDR Gold Shares exchange-traded fund revolutionised gold investing 20 years ago by introducing the first-ever commodity ETF. This innovation transformed gold into a tradable asset, similar to stocks, thereby democratising access to the precious metal and reshaping the investment landscape.

In 2004, investment demand for gold accounted for just 10% of total gold demand, with jewellery making up nearly 80%. Today, that balance has shifted, marking a new way the world engages with gold – investment demand now represents 25-45%, while jewellery accounts for around 50% or less.

It seems that gold’s next chapter is here: tokenisation. If central bank digital currencies and stablecoins serve as fiat on-ramps, enabling efficient cross-border transactions and financial innovation, then tokenised gold is the next logical step for central banks to explore. It has the potential to revolutionise how foreign exchange and gold reserves are managed on blockchain-based financial infrastructure. Bringing gold on-chain also opens doors for further democratisation and the unlocking of its untapped potential.

Tokenised gold is not just a new way to hold gold – it bridges the gap between real-world assets and on-chain finance. For instance, RWA platform and tokenisation technology provider Matrixdock has explored the practicality of tokenised gold and its advantages over traditional gold ETFs.

Global unified access to investment-grade gold

Gold ETFs remain inaccessible to many in the global South, where financial infrastructure is underdeveloped. Tokenisation addresses this gap by standardising gold investment, ensuring fair distribution and expanding accessibility.

Matrixdock mints London Bullion Market Association-accredited gold of 99.99% purity into gold tokens. These physical reserves are securely stored in Brink’s vaults in Asia. Token holders can verify gold reserves on-chain, enhancing transparency.

Unlike gold ETFs, which require brokerage accounts (often unavailable in emerging markets), tokenised gold is held in Web3 wallets and can be exchanged peer-to-peer. This shift enables a transition from an account-based financial system to a more efficient, inclusive and wallet-based system. Imagine a future where individuals hold tokenised gold alongside CBDCs, stablecoins and other digital assets, unlocking new financial possibilities.

Gold as a yield engine on blockchain

Tokenised gold offers unprecedented financial autonomy via its programmability. Individuals can now use their gold as high-quality collateral to borrow stablecoins or cryptocurrencies like bitcoin or lend their gold to earn interest in decentralised finance applications.

Smart contracts execute transactions autonomously based on pre-set rules, eliminating intermediaries and ensuring scalability. This universal application fosters fairness and efficiency while redefining counterparty risk and creating a level playing field for all.

How does tokenised gold generate yield?

The carry trade strategy uses gold tokens as collateral to borrow stablecoins at low interest rates and reinvest at higher yields, profiting from the interest rate differential. Gold tokens are deposited into DeFi liquidity pools with structured payout models, mirroring hybrid financial instruments. These tokens are lent to earn interest in a transparent, rule-based DeFi ecosystem.

Gold ETFs can’t do this. While gold ETFs are theoretically viable as collateral, their scalable adoption in leveraged or collateralised transactions is hindered by inherent limitations. These challenges stem from structural inefficiencies, such as reserve quality issues, reliance on account-based systems and analogue processes, which introduce subjectivity, opacity and exclusivity.

The feasibility of using gold ETFs as collateral often depends on the lender’s risk appetite and the client’s profile, resulting in high haircuts on loan-to-value ratios, arbitrary margin call requirements and excessive fees. These limitations ultimately make gold ETFs an inefficient tool for capital optimisation in collateralised markets.

Tokenised gold ETFs?

Through blockchain technology, tokenised gold ETFs could improve accessibility but they fail to address traditional ETFs’ fundamental inefficiencies. Wrapping gold ETFs in tokenisation is akin to putting lipstick on a pig – it doesn’t resolve the core issues. In contrast, natively tokenised gold, like Matrixdock’s XAUm, offers tangible ownership, greater transparency and direct access to physical gold reserves.

Tokenised structured products like ETFs do not address core inefficiencies, such as reliance on intermediaries and transparency constraints. Natively blockchain-minted gold tokens bring the intrinsic value of physical gold onto the blockchain – creating a clear distinction between synthetic and native digital assets – reminding us why we tokenise assets on-chain the first place.

The tokenisation of gold standardises gold investment, ensuring physical backing, verifiable reserves and transparent on-chain proof. It eliminates intermediaries, increasing efficiency and fairness. By storing gold in digital wallets, tokenisation enhances financial inclusivity, surpassing the capabilities of gold ETFs. It is the next fundamental step in gold’s evolutionary history.

Cici Lu McCalman is Head of Research at Matrixdock.