Like any other currency, It will still be subject to counter party risk. As a medium of (short term) exchange it will be as good as any other. For (medium to long term) wealth preservation I still prefer to have physical possession of the actual gold.

Is Ragnar behind this? ;)

I think it's a good idea. Blockchains are not as easy to hack or trace as some people may believe. Right now there are several companies selling gold with bitcoin at a small percent off but it's a regular sale transaction. Also, Vaultoro sells bitcoins and gold. The bitcoins are backed by physical gold in their vaults and audited weekly by BDO, according to their website. You can have the gold delivered or kept in the vault.

As impressed as I am with the concept of a cryptocurrency based on gold, there is one thing that especially bothers me (apart from the hacking danger). I find it somewhat disconcerting that a government (Great Britain) is involved through their royal mint. I think I'll stick with physical gold for the time being.

The great temptation that all banking systems face and have almost always failed is to only issue currency in accordance with the amount of commodity backing it. A run on the bank would mean nothing if there were always the exact amount of gold on deposit as currency (or claim checks) in circulation. If it is going to store gold it will need to charge a fee, if it is going to loan it out it needs to alert the owner of the gold and ask if they pay him a fee can they charge someone else a higher fee to do so. I have seen recent articles and news media hyping the use of only electronic money so that all the immoral activities such as drug dealing, money laundering (hiding money from the government) and other nefarious crimes will stop because the money will always be tracked by the government. Of course other activities will be stopped such as trading between two people without being property licensed, permitted and taxed for doing so. Think about all the taxes that must be paid because you engaged in an activity with someone else that the government had not part in, except to remove your property from you for doing so.

This already exists, in the form of Exchange Traded Funds (ETFs) that represent precious metals on deposit. This has all the earmarks of a scam, sucking people in because they believe that a blockchain transaction will somehow hide their wealth from authorities.

And when someone pulls the plugs on the computers....??

I do not trust blockchain systems, and I believe it is deceptive to call the result a cryptocurrency. All transactions in a blockchain system are traceable. Of course if it were non-traceable, no Western government would even tolerate its existence, much less sponsor it. (This is in addition to the more-publicized risk that anyone who manages to control a majority of the "mining" on a blockchain becomes able to seize ownership of the entire chain and everything it represents -- a shoe I've been waiting to hear fall against Bitcoin for a couple of years, now that one company does have a majority.)

A trustworthy cryptocurrency remains a dream based in a future in which the actual gold can be stored where governments cannot grab it. That can only reliably happen after the collapse of western civilization, which may or may not happen.

In the meantime I see this offering as a handwave, and not as any form of progress. Whoever invests in it will be lucky if he gets his money back at all.

a move in the right direction...

This will be the target of some of the best IT hackers in the world. The security system better be rock solid.

I use Bitcoins and Goldmoney, which is an online method to purchase real gold. They have a nice system.

The authorities won't like this because it's basically an untraceable transferable contract to deliver gold. Its untraceability is its only advantage over some other gold-backed instrument.

I like it for the same reason I like bitcoin: It's healthy competition for state-backed currencies.