I expect gold price to be notably higher next year: World Gold Council CEO

My vision is for all other SROs that emerge around the world to form a united representative force at the upper echelons of the gold industry, says David Tait

World Gold Council (WGC) Chief Executive Officer (CEO) David Tait believes gold will continue to shine. During his visit to Kolkata for the India Gold Conference, he spoke in a video interview to Ishita Ayan Dutt on a wide range of issues, including the self-regulatory organisation (SRO), gold demand and prices. Edited excerpts:

The WGC initiated a process for self-regulation in India. What is the status?

The SRO is going to be an expensive thing and the WGC will fund this. We are in the process of figuring out funding for the rest of this year and coming years. It’s extremely important that the industry coalesce under one body. My vision for this is that all the other SROs that pop up around the world form a representative force at the top table for the gold industry.

When is the SRO likely to be set up?

If the formal approval for funding for 2024 comes by the end of this year, then the SRO will be up and running with people in appropriate roles by the middle of next year. The structure has been agreed within the WGC. The documentation has been done and it looks very solid.

With respect to digital gold, have you had any discussions with the government?

No, I haven’t. But digital gold plays an enormous part of my goals for several projects. First, we are trying to solve gold bullion integrity or gold bar integrity. Many of the capital hurdles and barriers that exist in the market for institutions to trade gold revolve around trust and transparency. So, solving gold bullion integrity was my starting point. Working with the London Bullion Market Association (LBMA) we brought the industry together and set up the gold bullion integrity database together. The idea is to create a database that’s immutable as very trusted gatekeepers around the world, with all forms of accredited gold going into it. As an extension, I hope to take on artisanal mining and give the operators the opportunity to get their gold into the ecosystem in exchange for responsible sourcing. And, hopefully, I want to force the children out of the mines throughout the world. That’s the cornerstone of what we are trying to do. There is an opportunity and we are trying to examine digitising all physical forms of gold. From the digital layers, you can create a multitude of different financial assets.

Is WGC looking to take up any policy matter with the Indian government?

Regulation of digital gold — it’s obviously in the market’s advantage and gold’s advantage if that happens.

Gold prices have been under pressure with a stronger dollar. Are there more headwinds to gold prices?

I hold a different opinion on gold prices. I think there were many opportunities for the gold price to fall quite substantially, given the headwinds in interest rates and inflation. But it hasn’t. In the original run-up, when we got to $2,100 per ounce, there was quite a lot of exposure to the upside. But it fell back to $1,650 per ounce and has gone sideways within a large band for a long time. This means that the volatility has dropped. Gold has a great opportunity to go higher, not least from the geopolitical and geoeconomic factors but from a fundamental shift in demand. First, because of digitisation and trust that we are trying to create in the market. Also, throughout the world, you are looking at a lot of stress because of debt. At some point, the debt balloon will burst. And, I think, we are in a perfect situation for gold to pick up the slack if we can get the ongoing augmentation process through in time.

What would be the major drivers for gold demand?

If the price declines a bit in India, you are going to see a pickup in demand. However, I do think that gold has been in a relatively stable band for quite a while now and people do adjust. So, ironically, I would expect to see people chase the spike in price of gold at least from an investment perspective. The major drivers for gold demand going forward are going to be the ability to control the cost of living and have more disposable income. Perhaps the duty situation will change, but I can’t speculate on that. Geopolitical and geoeconomic worries of the world are going to continue to make gold feel attractive to very many people. With regard to price, I would be very surprised if gold is lower this time next year. I expect gold to be significantly higher next year. There are many people who have exited their long gold holdings and are worried that it hasn’t really declined.

In April-June 2023, buying of gold by central banks slowed down. Do you see it picking up?

Most of the central bank buying is always in developing countries. The Western countries have obviously accumulated a great deal. Given the level of exposure in these developing countries, I think there is going to be a continued trend of raising gold holdings – perhaps nowhere near as some Western countries, but significantly higher now. This is in order to have a balanced portfolio of their own reserves. But they are going to wait for the price to come back to them.

The regulatory landscape in India has undergone changes, with restrictions on cash transactions and high import duty. How has it impacted the market?

The import duty has, as some would say, forced a growth in illicit trading in gold. I have listened to two sides of that argument (at the India Gold Conference). You can make assumptions in that regard, and it would seem a logical conclusion, but I don’t really have a strong opinion on it because we don’t have the data. The government created the (India) International Bullion Exchange and tried to create one conduit into the country for imported gold. I applaud that as an effort to sidestep the trade in illicit gold. From a governmental perspective it made a lot of sense because there is an enormous amount of tax that will come from it, if you can force legitimate gold through one doorway.

More than 10 million pieces of jewellery are hallmarked every month. How can it be leveraged further?

I would hope that the industry recognises that it has a vested interest in investing in hallmarking. It shouldn’t necessarily be a WGC obligation to fund that forever. What we are hoping through the SRO is precisely that. The SRO will say this is in our interest to set about hallmarking far more broadly. I think you are going to see the SRO prove its worth over time. Hallmarking may be one of the things they land on for further expansion. We have tried to give the SRO a stake in the ground and make it a body around which to coalesce so that it has a say and gets something done.

Is responsible sourcing of gold gaining currency among consumers?

Increasingly so. Very few conversations go by where responsible sourcing, integrity and provenance are not discussed. In India, it will be the SRO’s role to ensure it.