Although gold is recognized as an essential monetary asset, it is also a dead asset, just sitting on a ledger; however, the tokenization of the precious metal could increase its utility, attracting more capital to the space, according to experts at the London Bullion Market Association’s annual Global Precious Metals Conference.

Vincent Domien, Head of Precious Metals Trading at ICBC Standard Bank, said during a panel discussion that while institutional demand for tokenized gold remains relatively low, that could change dramatically once the metal can be put to work more efficiently.

“I think the biggest thing for me at the moment, especially with price going up, is you have this dead asset on your balance sheet doing absolutely nothing for you,” he said.

Domien said that although physical gold can already be used as collateral, the process remains cumbersome, with restrictions around vault locations and significant haircuts. Tokenization could potentially make gold easier to transfer and allow institutions to use their holdings as collateral for swaps or to meet margin requirements.

“If you’re able to tokenize gold and everybody’s able to instantly use it, then suddenly you increase the use of gold dramatically,” he said. “How do we make this asset that lies on everybody’s balance sheet doing nothing, do something?”

Mike Oswin, Global Head of Market Structure and Innovation at the World Gold Council, said unlocking dormant gold could potentially release billions of dollars of new collateral into financial markets.

For the gold market, greater utility could ultimately translate into greater demand.

James Willis, Global Head of Precious Metal Sales at HSBC, said successful digital products could lead to higher gold holdings while encouraging investors and institutions to trade and use the precious metal more frequently. Because properly structured tokens are backed by physical bullion, growing adoption could ultimately feed back into demand for vaulted gold.

“If we try and develop a product and we are successful, and we can get something out there into the ecosystem that is useful and helps to expand gold’s utility, potentially this is a good thing for us as a business,” Willis said. “We will see gold holdings go up and we will see people…trading and using gold more frequently.”

Tokenization could also expand gold’s appeal among retail investors.

Willis pointed to HSBC’s digital gold token in Hong Kong, saying the product attracted new clients even though those investors already had access to physical bullion, ETFs and paper gold products. He said the simplicity of buying and transferring the token helped attract consumers who had not previously been interested in existing options.

The potential market for this is significant. Oswin said the World Gold Council estimates there is between $6 trillion and $7 trillion in retail investment assets, compared with only roughly $50 billion to $60 billion in the retail vaulted-gold and token market.

He added that gold has a unique opportunity in the broader tokenization trend because, unlike many financial assets that already exist electronically, bullion is a physical asset sitting in a vault.

The challenge is using digital infrastructure to mobilize that physical wealth.

“It’s physical, it sits in a vault, it needs management,” Oswin said. “It’s so important that we use the innovation now to be able to mobilize and get utility from that physical asset.”

However, panelists emphasized that tokenization cannot compromise one of gold’s most fundamental qualities: trust.

The panel noted that any digital representation ultimately has to be backed by physical metal, requiring trusted custodians, clear legal ownership and common standards. James Chapman, Director at Hilltop Consulting, said holders need confidence that actual gold sits behind their digital asset and that they retain enforceable rights to that metal.

The World Gold Council is working on a Wholesale Digital Gold initiative designed to combine some of the advantages of allocated and unallocated bullion. The goal is to preserve the legal certainty and ownership rights associated with allocated gold while adding fractionalization and easier transfer and settlement.

Rather than replacing the existing market, Chapman said the project is designed to create a complementary “third” way to hold, transfer and settle bullion.

As Domien noted, investors can be long gold through either an ETF or a token, but the difference is what they can do with the asset once they own it.

“In both cases you’re long gold, but you don’t have the same utility out of it,” he said.

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The U.S. Army’s McAlester Army Ammunition Plant in Oklahoma, one of the country’s main bomb-making sites, will manufacture and load explosive payloads for drones built by Perennial Autonomy, the drone company backed by former Google CEO Eric Schmidt.

The plant held a ribbon-cutting ceremony to open the partnership, the U.S. Army said. Under the arrangement, McAlester will build, load and deliver combat-ready payloads for Perennial Autonomy’s unmanned aircraft, while the company supplies the drones and their guidance systems.

The U.S. Army did not say which Perennial Autonomy drones will carry the McAlester payloads, how many will be produced, what the arrangement is worth, or when deliveries begin.

Perennial Autonomy is best known for drones that have fought in Ukraine. Schmidt started the effort in 2023, and it operated as Project Eagle before taking the Perennial Autonomy name. Will Roper, the former U.S. Air Force acquisition chief, joined the company along with engineers from Apple, SpaceX and Google. Its Merops interceptor, built around the AS-3 Surveyor drone, was developed to bring down Russian Shahed attack drones and costs roughly $15,000 per interceptor. The company says Merops has made more than 4,000 interceptions in Ukraine.

The company also makes the Bumblebee quadcopter family and the Hornet, a fixed-wing strike drone that has hit Russian logistics convoys in Ukraine at ranges beyond 100 km (62 miles).

Last month, Perennial Autonomy won the deep-strike category of Gauntlet II, the second evaluation round of the U.S. Department of War’s Drone Dominance Program, scoring 80.1 points and receiving an order for 8,000 drones. The Pentagon has not published the value of that order.

In May, the Pentagon’s counter-drone task force, JIATF-401, awarded the company a three-year contract with a $500 million ceiling covering Merops, Bumblebee and Hornet. U.S. Army Secretary Dan Driscoll had earlier told lawmakers the service bought 13,000 Merops interceptors in the early days of the war with Iran. Lithuania has also bought 48 Merops interceptors, joining the United States and Poland.

The plant, which falls under the U.S. Army Sustainment Command, produces, stores, ships, renovates and destroys conventional ammunition, and its workforce includes chemists, load-assemble-pack specialists and quality inspectors. Drone payloads give that workforce a new line of steady work alongside its bomb production.

“Integrating Perennial Autonomy’s advanced guidance systems with MCAAP’s proven ordnance manufacturing directly answers the call to modernize the OIB,” said Brian Lott, the plant’s civilian deputy. “This collaboration acts as a critical force multiplier, ensuring that next-generation drone fleets are armed with the precise, lethal and dependable capabilities required to dominate modern, high-threat environments.”

Partnerships with private companies also help the plant cover sustainment costs and pay for infrastructure upgrades, according to the U.S. Army.

“This partnership with Perennial Autonomy is a testament to the agility and generational skill of the workforce at McAlester,” said Col. Curtis Perkins, the plant’s commander. “Our employees are second to none. By applying their deep technical expertise to next-generation drone munitions, we are proving that our historic facilities and our people can rapidly pivot to support the warfighter.”

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