Internet Investment Gold

Internet Investment Gold (IIG) allows investors to buy physical gold online and have it stored on their behalf. The landscape of such products has grown significantly over the last decade and new players are continuing to emerge, with the largest providers now holding billions of US dollars worth of gold on behalf of investors.

As with any product group, it is important that investors fully understand what they are investing in and can identify the right solution before taking any decisions. Equally, it is important that product providers follow sound practices to ensure a positive client experience. The World Gold Council has therefore developed two sets of guidelines, known as the IIG Investor Guidance and the IIG Product Provider Guidance, to achieve this.

The IIG Investor Guidance aims to help investors understand how to invest in gold online, differentiate between providers and assess which products best meet their needs, while the IIG Product Provider Guidance defines sound practices for providers of Internet Investment Gold products through laying out a blueprint of recommended best practice.

The guidance is designed to be a starting point. It does not constitute investment, legal or tax advice and is provided for educational purposes only. You can download either guidance document below:

 

Questions and answers

What are the two sets of guidance trying to achieve?

The IIG Investor Guidance is designed to help potential investors make an informed decision regarding investing in gold sold via the Internet, that is stored by the provider on their behalf. The IIG Investor Guidance provides relevant questions that investors should consider when making an investment decision. For each question, background information and guidance are included. The topics covered include: product and provider characteristics, marketing and sales practices, and operational procedures.

The IIG Product Provider Guidance sets out minimum features – or sound practices - that product providers should offer. It also proposes ‘additional best practices’ which go beyond the minimum requirements to further strengthen and differentiate products. The sound and additional best practices cover key aspects of IIG, such as marketing and sales, storage and risk management. 

What is the difference between the Investor Guidance and the Product Provider Guidance?

While the IIG Investor Guidance aims to empower investors, the IIG Product Provider Guidance is mainly targeted at supporting companies offering or developing IIG products. Both documents are looking at the space from different perspectives and complement each other. 

What products are covered by Internet Investment Gold? 

Internet Investment Gold covers gold products that are sold via the internet and stored on the investor’s behalf. This includes the emerging area of gold-backed crypto tokens. The two sets of guidance are not intended to cover gold-backed financial securities such as exchange-traded funds (ETFs) or gold that is sold via the internet for immediate delivery. The reason for not including securities such as ETFs is that, having been in existence for over a decade, best practice procedures are already well established.

How big is the sector and what regions are affected? 

There are estimated to be more than 200 providers of Internet Investment Gold products or similar products globally. The largest providers hold billions of US dollars in precious metals on behalf of investors. Product providers are spread across numerous countries, ranging from Europe and North America to Asia and the Middle East.

Why is guidance necessary? 

Internet Investment Gold is an emerging, fast-growing sector of the gold market. Many products are regularly being launched around the world, but product features can vary.

For investors that are new to the gold market, certain practices such as the different types of ownership that exist, the sourcing of gold, custody, and audit requirements will be unfamiliar. The IIG Investor Guidance aims to help educate potential investors about some of the unique features of the gold market.

The IIG Product Provider Guidance is supporting companies in offering high-quality products. Unlike many other investment products, Internet Investment Gold does not fall under local regulations for investments in a number of jurisdictions. The Product Provider Guidance establishes sound practices that protect investors and support the companies offering such products.

What are the main benefits of investing in Internet Investment Gold? 

Gold is a unique asset that is highly valued by savers and investors around the world. Its investment characteristics are numerous. It acts as an effective diversifier in a portfolio. It protects funds against the wealth eroding effects of inflation and currency depreciation. It is a highly liquid asset with no credit or counterparty risk. Internet Investment Gold provides investors with a means to legally own physical investment gold, while having it kept safely in professional vaults. Investors typically have the right to withdraw their holdings, but by leaving it in the vaults they benefit from an efficiency and convenience which is similar to that of other modern investment products.

What is the risk to investors buying Internet Investment Gold products? 

Investment decisions for gold or IIG involve risks as with all other investments. Like all new markets, it is important that investors act with caution when picking a new investment product such as IIG and arm themselves with as much information as possible when making investment decisions. The World Gold Council has created the guidance to help investors with this process. 

Why is the World Gold Council issuing guidance? 

The World Gold Council works with governments, international agencies and policymakers to help reduce barriers and improve access to gold. We develop globally recognised standards in seeking to create clarity and consistency where they are lacking and reinforce trust across the gold value chain, bolstering gold’s acceptance as a mainstream asset and broadening its investor appeal. Both sets of guidance are intended to serve this purpose by addressing investors, product providers and other stakeholders.

What implications does the IIG Product Provider Guidance have for providers of these products? 

The IIG Product Provider Guidance supports companies offering Internet Investment Gold products, or planning to do this in the future. The proposed sound practices are voluntary so, at present, there will be no audit or public endorsement by the World Gold Council. However, we believe that conforming with these practices will strongly benefit product providers and investors.

Providers are encouraged to comply with all the sound practices outlined in the Product Provider Guidance. Where there are reasonable deviations from individual practices, due to market or product specifics, for example, providers should explain why they have adopted an alternative approach.

Product providers are encouraged to independently demonstrate compliance with the Guidance, which should strengthen trust in their offerings, facilitate customer acquisition, drive business growth and foster cooperation with external partners such as custodians and banks.

How have the two sets of guidance been developed?

The IIG Investor Guidance was first published in November 2018 following extensive research of existing offerings, market practices, mandatory and voluntary regulations applying to other investment products as well as discussions with a diverse range of product providers.

While the IIG Product Provider Guidance was based on similar market research work, there was a formal consultation phase with providers and other stakeholders. We have asked stakeholders for their feedback during a public consultation which took place in February 2019. The Product Provider Guidance incorporates valuable feedback and suggestions from this consultation.

Are there any next steps planned?

The IIG sector is still evolving, so-. we expect both sets of guidance to be updated periodically, in response to any significant shifts or developments.

During the consultation process, there was widespread support for the World Gold Council’s endorsement of product providers’ offerings. In light of this, we intend to convene an industry working group, comprising of product providers and other key stakeholders, to discuss how best to develop this concept. Product providers and other stakeholders will be encouraged to join this group so they can participate in the ongoing development of sound industry practices.

Disclaimer:

This website is provided for educational purposes only and does not constitute investment, legal or tax advice or a recommendation or an offer for the purchase or sale of gold, any gold-related products or services or any other products, services, securities or financial instruments (collectively, “Services”).

Further Terms and Conditions

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This website is provided for educational purposes only and does not constitute investment, legal or tax advice or a recommendation or an offer for the purchase or sale of gold, any gold-related products or services or any other products, services, securities or financial instruments (collectively, “Services”). This website does not suggest the future or expected value of gold, any gold-related products or services, or implicitly recommend or suggest an investment strategy of any kind. World Gold Council does not conduct any diligence on providers of Internet Investment Gold or Tokenised Gold. Information available in this website should not be considered as information sufficient upon which to base an investment decision. Investors should discuss their individual circumstances with their appropriate investment professionals before making any decision regarding any Services or investments in any Services.

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