Gold Is Moving Onchain, but London Still Holds the Keys

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• ICE has opened a physically settled gold futures market inside London’s bullion hub.
• Tokenized products such as PAXG already depend directly on London’s vaulting infrastructure.
• DNB’s recent reserve shift shows why the location and tradability of physical gold remain important.

Gold ownership is becoming increasingly digital, but the infrastructure supporting it remains firmly physical.

That tension came into sharper focus on Oct. 6 after Intercontinental Exchange, the owner of the New York Stock Exchange, launched a new gold futures market in London. The contracts began trading Monday alongside futures for silver, platinum and palladium, bringing another financial layer directly into the world’s largest physical bullion center, according to The Wall Street Journal.

London handles more than $180 billion of OTC gold transactions on an average day, while its vaults contained about 9,632 metric tons worth roughly $1.4 trillion at the end of August, according to London Bullion Market Association data cited by the Journal.

ICE’s launch is a traditional derivatives story on the surface. For the growing tokenized-gold market, however, it provides a reminder of where digital bullion ultimately gets its economic substance.

Tokenized Gold Already Runs Through London

PAX Gold offers one of the clearest examples of the connection.

Each PAXG token represents one fine troy ounce of London Good Delivery gold, with the underlying bullion held on a segregated basis in LBMA-accredited London vaults. The token can trade around the clock and move across supported blockchain networks, while the metal backing it can remain inside the vault.

Paxos also publishes monthly reserve reports and says holders can redeem their tokens for physical bullion, unallocated Loco London gold or dollars, subject to the applicable requirements. Physical redemption is a very different process from transferring a token: Paxos’ terms currently require at least 430 PAXG plus applicable fees for redemption into a London Good Delivery bar.

That gap between a near-instant digital transfer and an institutional-sized physical redemption is where the traditional bullion market re-enters the picture.

ICE Is Building Below the Token Layer

ICE’s new product operates much closer to the underlying metal.

Its XAU Gold Daily Futures represent 100 fine troy ounces and are physically settled through unallocated Loco London vault accounts. Deliverable bullion must satisfy LBMA standards, with settlement taking place through London vaults operated by members of the London Precious Metals Clearing Limited system.

The contract therefore adds another route for institutions to manage exposure around the same London bullion ecosystem that already supports some tokenized-gold products.

Three Ways Gold Can Move

The three instruments solve different problems. Physical bullion provides the asset itself, futures provide standardized risk transfer, and tokenization makes ownership more portable and programmable.

For token issuers, that structure also creates dependencies that are easy to overlook. Paxos, for example, says creating new PAXG requires it to purchase London Good Delivery gold in the underlying market. The issuer is therefore exposed to real bullion-market pricing while converting new demand for tokens into additional physical reserves.

DNB’s 86-Tonne Move Shows Why Location Still Matters

A recent decision by De Nederlandsche Bank adds another dimension to London’s growing importance.

Between March and August, the Dutch central bank transferred approximately 86 tonnes of gold from its combined holdings in the United States and Canada toward London. DNB said the reallocation was intended to improve the tradability of its reserves and strengthen its ability to respond during severe crises amid increased geopolitical uncertainty.

The mechanics are revealing.

About 59 tonnes were sold in New York and replaced with gold in London, avoiding the need to physically transport that portion across the Atlantic. Another 27 tonnes were moved from North America to the Netherlands while an equivalent quantity of compliant bullion moved from the Netherlands to London.

Following the operation, London’s share of Dutch gold reserves rose from 18.1% to 32.1%. DNB specifically pointed to gold held at the Bank of England as highly tradable because it complies with international market standards.

For digital-gold markets, the episode demonstrates why “backed by physical gold” is only the beginning of the analysis. Two identical quantities of bullion can have different practical liquidity depending on their location, specifications and access to the wholesale trading network.

Tokenization Makes Custody More Important, Not Less

A token can remove several inconveniences associated with directly owning bullion.

PAXG holders can own fractions of institutional-grade bars rather than purchasing an entire bar, and ownership can move between blockchain addresses without arranging physical transportation. Paxos says the bullion backing PAXG is independently verified monthly against the token supply.

But the investor is exchanging one set of frictions for another.

The relevant questions shift from arranging personal storage and transportation toward the quality of the issuer, custodian, reserve verification, redemption process and legal claim over the metal.

For larger holders, liquidity at the physical layer matters as well. If token creation requires additional bullion to be sourced, or redemptions require exposure to be converted back into physical or unallocated gold, the efficiency of the London market becomes part of the token’s infrastructure.

That is why ICE’s entry is more relevant to tokenized gold than it initially appears.

ICE Still Has to Solve London’s Old Futures Problem

London’s dominance in physical bullion has never guaranteed success in exchange-traded derivatives.

The London Metal Exchange abandoned its gold futures in 2022 after five years of weak activity, leaving New York as the dominant exchange-traded futures center. ICE is now attempting to establish a London alternative despite the deep liquidity already concentrated on CME.

Its starting position is stronger in one respect: ICE already operates London’s benchmark gold auction and major global derivatives infrastructure. The new futures also settle directly into the Loco London ecosystem rather than merely borrowing London’s name.

Whether that translates into liquidity will be visible in trading volume, open interest and institutional participation over the coming months.

For tokenized gold, a successful London futures market could add another institutional tool around the bullion that supports digital products. It would not make blockchain gold more decentralized, nor would it remove custody or redemption risk. It would deepen the financial infrastructure surrounding the physical asset.

That is the more consequential part of today’s launch.

Gold may increasingly circulate as tokens, fund shares, futures contracts and other financial representations, but all of them eventually point back toward a market capable of pricing and delivering the metal itself.

On Oct. 6, ICE added another piece to that market in London. The next test is whether institutions actually use it.