Two tokens can both be described as "backed by gold" and represent completely different claims.
One is a serial-numbered bar sitting in a named vault, examined periodically by an accounting firm. The other is gold that has been assessed to exist inside a specific piece of ground, certified by a geologist, and not yet mined.
Two tokens can both be described as "backed by gold" and represent completely different claims.
One is a serial-numbered bar sitting in a named vault, examined periodically by an accounting firm. The other is gold that has been assessed to exist inside a specific piece of ground, certified by a geologist, and not yet mined.
Both are real. Neither description is dishonest. But they carry different risks, and the phrase "backed by gold" flattens the difference completely. This article is about that difference, because it is the single most important thing to understand about any gold-backed token, and because the honest version of it is not flattering to everyone including us.
The strongest form of gold backing has four properties, and each word is doing work.
Allocated. Specific bars, identified by serial number, refinery and weight, held in your name or in a trust for your benefit. The opposite is unallocated, which is a claim against a pool. That is a creditor's position, not ownership of metal.
London Good Delivery. A bar specification the professional market accepts without re-assay. It constrains weight, fineness and provenance, which is what makes a bar liquid at institutional scale.
A named custodian in a named jurisdiction. You can find out which company holds it and under which country's law, which determines what happens in an insolvency.
Periodic attestation. An accounting firm examines, on a stated date, that the holdings existed. The major vaulted tokens publish these monthly or quarterly.
What that combination buys you is a claim on metal that exists in refined form right now, with a paper trail to a specific bar. What it costs you is that the product pays nothing, and typically that redemption requires a minimum measured in hundreds of ounces, so redemption functions as proof the backing is real rather than as a feature most holders use.
And the crucial limitation, which the LBMA states in its own guidance to the London market: when allocated metal is lent, it becomes unallocated, and the lender retains full credit exposure to the borrower. That has a consequence nobody in this industry can escape:
No product can of er you allocated, segregated, serial-numbered gold and a yield generated by lending those same ounces. One or the other, per ounce.
If a provider claims both, ask for the legal structure that makes it possible, and treat the absence of an answer as the answer.
In-situ means in place. Gold that has been assessed to exist within a defined body of rock and has not been extracted.
The rationale for tokenising it is genuine rather than promotional. Mining is enormously capital-intensive, takes years, and is environmentally destructive. A resource owner who wants liquidity before extraction has historically had two options: sell the property, or raise capital against it through conventional finance. Tokenising the resource is a third route, and it lets a holder gain exposure to metal that is never disturbed.
It also produces a structurally different claim, and here is where precision matters more than enthusiasm.
When you hold a token backed by in-situ reserves, you hold a certificate referencing assessed metal in the ground, not refined metal in a vault. The intervening steps between that assessment and a deliverable bar are extraction, processing, refining, permitting, financing and title. Each is a real-world process that can be delayed, become uneconomic, or fail.
This is where anyone who has worked in mining will judge a gold-backed token, and it is almost never explained to retail buyers. It is not difficult.
The main international reporting frameworks for mineral properties divide assessed metal into a hierarchy, and the tiers are not interchangeable.
Mineral resources are quantities of metal assessed to be present, graded by geological confidence:
Mineral reserves are the part of a measured or indicated resource that studies have shown can be economically extracted, after accounting for mining costs, processing recovery, metal prices, permitting and infrastructure. They are graded as probable and proven.
A resource is not a reserve. A resource states metal is probably there. A reserve states it can be got out at a profit. Those are different claims and the gap between them is where most mining projects die.
Inferred resources cannot be converted directly into reserves, and the frameworks generally prohibit using them in economic studies for exactly that reason.
Resource estimates change. More drilling can revise an estimate in either direction, and metal price assumptions move reserves across the viability line without a single rock moving.
So the useful question is never "is it certified." It is: certified to which category, by which qualified person, on which property, under which framework, and when? A certificate over an inferred resource and a certificate over a proven reserve are very different documents wearing the same word.
There is a simple economic point here that any honest treatment has to make.
An ounce of gold in the ground is not worth the price of an ounce of gold, because somebody has to spend money to turn the first into the second. Mining, hauling, processing and refining all cost real money per ounce, and that cost has to come out of the metal's value before anyone holds a bar.
This is why simply multiplying an assessed resource by the spot gold price overstates its worth, and why the mining industry's own valuation practice treats gross in-situ metal value as a misleading figure rather than an appraisal. It ignores extraction cost entirely, and it ignores whether extraction is viable at all.
The practical implication for a token structure is that in-situ backing is normally applied with a substantial discount. A structure that assigns several ounces of in-ground resource to back one ounce of token face value is applying exactly such a haircut. That is prudent design rather than generosity, and it is worth understanding in the right direction: it is a discount reflecting that in-ground gold is worth much less than refined metal, not a multiple of cover in the sense a vaulted product would mean it.
Read carefully, a "five to one" cover ratio and an "eighty percent discount" can describe the same arrangement. Neither phrasing is wrong. One sounds considerably better than the other, and knowing they are the same sentence is the useful part.
GGBR is backed by in-situ reserves held as certificates issued by I-ON Digital Corp, not by vaulted, allocated, serial-numbered bullion. That is the structure, and it is a material difference rather than a marketing distinction.
GGBR is denominated at a thousandth of a troy ounce, which is the reason a meaningful gold position can start at a few dollars rather than the four thousand or so a full-ounce vaulted token requires. That is a real advantage and it is the clearest one we have. It also means the metal is never mined, which is the environmental argument for the design.
It carries extraction, permitting, title and financing considerations that a bar in a vault does not. Our comparison of the major gold tokens takes the same position and puts GGBR next to PAXG and XAUT with those weaknesses stated: PAXG vs XAUT vs Yield-Bearing Gold.
What we are not going to do in this article is tell you the certification question is settled. If in-ground backing matters to your decision, and it should, then the documents worth asking us and any in-situ issuer for are these:
Those six are the whole question. Any in-situ issuer who can produce all six is in a strong position. Any who cannot should be asked why not, and that includes us.
One further point, since this article is about backing rather than yield. Whatever backs a token, the moment reserves are pledged onward to generate a return, you also hold a credit exposure to whoever they are pledged to. That is true of vaulted and in-situ structures equally, and we set out ours in Is Gold Staking Safe?.
Neither column is the right answer for everyone, and we would rather say that than pretend the table has a winner.
If you want a bare, regulated, vaulted claim on metal with no income and no counterparty paying you, a vaulted token answers that better than we do. It is the conservative choice, and choosing it is not a compromise.
If you want a small entry point and a gold-denominated income, and you are willing to take the structural considerations of in-situ backing plus a named credit exposure, that is the trade our product makes. It is a real trade with real costs on both sides.
Ask what physical state the gold is in. Refined bars, or resource in the ground. This single question separates the two categories and most marketing will not volunteer it.
Ask for the last attestation or assessment, and its date. Older than a year should be treated as unverified.
Ask who holds it and under which law. For vaulted metal, the custodian and jurisdiction. For in-situ, the property and its title status.
Ask whether it is allocated or unallocated, and whether it is currently pledged to anyone. Allocated metal that has been lent is no longer allocated.
Ask what redemption actually requires. A minimum you cannot meet is not a redemption right in practice.
Distinguish an attestation from an audit from proof of reserves. They are three different levels of assurance, and a smart-contract audit is a fourth thing entirely that says nothing about metal.
Gold that has been assessed to exist within a defined body of rock and has not been mined. In-situ means in place.
No, and it is not intended to be. Vaulted gold is refined metal with a paper trail to a specific bar. In-ground gold is assessed metal that has not been extracted, so it carries extraction, permitting, title and financing considerations that a bar does not. In exchange it can support much smaller denominations and leaves the metal undisturbed.
A resource is metal assessed to be present, graded by geological confidence. A reserve is the portion of a resource that studies show can be extracted economically. Only a reserve speaks to commercial viability.
It means a qualified person assessed the property under that framework and reported a result in a specific category. The category is what matters. Inferred resources are the lowest confidence tier and generally cannot be used in economic studies at all. Ask which category was reported, not just whether a report exists.
Specific, serial-numbered bars held in your name.
Unallocated means a claim against a pool, which makes you a creditor rather than an owner of particular metal.
Not the same ounces. Per LBMA guidance, allocated metal that is lent becomes unallocated. Any provider claiming both owes you the legal structure that makes it possible.
Because turning it into a bar costs money per ounce, and because extraction may not be viable at all. Valuing an assessed resource at the spot price of refined metal ignores both, which is why serious valuation practice treats gross in-situ metal value as misleading.
In-situ reserves held as certificates issued by I-ON Digital Corp, rather than vaulted bars. That is the structure, and the considerations it carries are set out above.
On-chain you can verify supply. Backing is off-chain, so it depends on documents: the attestation or technical report, its date, its author, and its scope. Ask for the document rather than the claim.
"Backed by gold" is not one claim. It is at least two, and they differ on the most basic question there is: whether the metal has been dug up.
Vaulted, allocated metal is the conservative structure and its cost is that it pays nothing and requires an ounce's worth of capital per unit. In-situ certificates support far smaller positions and leave the ground intact, and their cost is a chain of real-world processes between the certificate and a bar.
Neither is a scam and neither is obviously better. But a reader who cannot tell which one they are buying has been failed by whoever sold it to them, and the questions in this article are the ones that tell you.
This article is for informational purposes only and is not financial advice.
| Category | Vaulted, allocated (PAXG, XAUT) | In-situ certificates |
|---|
| Physical state | Refined bars, poured and assayed | Metal in the ground, not extracted |
| What you hold | A claim on specific serial-numbered bars | A certificate referencing assessed reserves |
| Verification | Custodian attestation on a published cadence | Geological assessment by a qualified person |
| Key risk | Custodian and issuer | Extraction, permitting, title, financing, and estimate revision |
| Redemption | Physical delivery, high minimums | Depends entirely on the issuer's terms |
| Typical denomination | One troy ounce | Can be far smaller |
| Entry cost | Roughly the price of an ounce | Can be a few dollars |
| Environmental footprint | Mining already occurred | Metal is left in place |
| Valuation basis | Spot price of refined metal | Assessed metal less extraction economics, hence a discount |
