The Surge of Tokenized Gold Amid Record Spot Gold Prices

As traditional investments blend with digital currencies, the demand for gold-backed cryptocurrencies, known as tokenized gold, is experiencing a significant rise. With gold prices reaching record highs, big investors are purchasing substantial amounts of Tether Gold (XAUt), forecasting that this market will grow tremendously in the near future.

Key Takeaways

The rise of tokenized gold is linked to soaring gold prices, surpassing $4,000 recently.
Major investors, or "whales," have invested over $30 million in Tether Gold in just a week.
Gold-backed tokens are viewed as a stable investment compared to traditional cryptocurrencies due to gold's long-standing value.
The market for tokenized gold has expanded from $500 million at the start of the year to approximately $3 billion now.
Challenges remain, including the need for trust in custodial processes and market liquidity.

Understanding Tokenized Gold

As gold and cryptocurrencies converge, gold-backed tokens have emerged as a distinctive asset class that fuses gold's stability with the diverse capabilities of blockchain technology. This investment vehicle, commonly termed “tokenized gold,” offers a new way for investors to gain access to gold through digital means.

With gold prices hitting unprecedented levels, the appetite for gold-backed tokens has surged. According to the blockchain analytics platform Lookonchain, two significant crypto investors purchased over $30 million worth of Tether Gold (XAUt) recently.

Whales are buying $XAUT (Tether Gold)!
casualpig.eth bought 4,463 $XAUT ($18.7M) over the past week.
Whale 0xdfcA bought 2,879 $XAUT ($12.1M) today. — Lookonchain (@lookonchain) October 15, 2025

Alex Tapscott, CEO of CMCC Global Capital Markets, noted that as the price of gold exceeds $4,000, the trading volumes for tokenized gold are expected to increase significantly. He shared that the current volume of tokenized gold has soared to roughly $3 billion, increasing from under $500 million at the year's start, with daily volumes now exceeding $600 million. This growth establishes gold-backed tokens as one of the fastest-growing categories in the tokenized asset sphere. Notably, Galaxy Digital anticipates that tokenized assets could reach $1.9 trillion within the next five years.

What are Gold-Backed Crypto Tokens?

According to Alex Melikhov, co-founder of the digital asset management firm BrettonWoods, gold-backed cryptocurrencies are digital tokens linked to physical gold held securely.

“Each token represents ownership of a fixed amount of gold, generally one troy ounce or a fraction thereof,” Melikhov explained. The physical gold is usually held by a certified custodian, and the issuer of the currency retains legal ownership. Issuers are committed to redeeming an equivalent amount of gold upon request.

Due to the inherent volatility associated with cryptocurrencies, Melikhov argues that tokenized gold may attract more conservative investors seeking stability backed by tangible value. He remarked that while Bitcoin and Ethereum are seen as more speculative, gold has a history of over 5,000 years as a stable asset. Moreover, tokenized gold provides the ease of digital transactions without sacrificing the underlying asset's credibility.

“Tokenized gold helps bridge the gap between traditional finance and decentralized finance,” Melikhov added.

Noteworthy Gold-Backed Tokens

With the market capitalization of gold-backed cryptocurrencies approaching $3 billion, Tether Gold (XAUt) and PAX Gold (PAXG) stand out as leading players.

Tether Gold Market Source: CoinMarketCap

Tether Gold (XAUt) is a stablecoin representing ownership of one troy ounce of gold. The physical asset backing XAUt is securely stored in audited vaults, verified by Tether, which provides frequent transparency reports.

PAX Gold (PAXG) is another significant gold-backed token, backed by one troy ounce of gold stored in London Good Delivery bars. These bars are held in Brink’s vaults in London, ensuring that each PAXG token is equivalent to one ounce of physical gold. PAXG is issued by the Paxos Trust Company and complies with regulations from the New York State Department of Financial Services.

Other notable tokens include Kinesis Gold (KAU), Matrixdock Gold (XAUM), and Comtech Gold (CGO).

Use Cases of Gold-Backed Crypto Tokens

Gold-backed crypto tokens serve various practical functions, particularly as a hedge against inflation. Melikhov points out that persistent inflation and geopolitical issues are driving investors toward tangible assets like gold.

“With a robust infrastructure in place for tokenized gold, along with regulated issuers and audited reserves, investors are increasingly confident in holding these commodities as alternatives to fiat-backed stablecoins,” he said.

Additionally, Tapscott mentioned that tokenized gold can be used as collateral in decentralized finance (DeFi) protocols, providing investors with leverage—similar to margin loans offered in traditional brokerages but within a blockchain context. Essentially, tokenized gold enhances the usability, fungibility, and margin potential of gold.

As more investors seek digital avenues to access gold, gold-backed crypto tokens are emerging as a viable solution. Tapscott indicated that holding physical gold comes with security risks and logistical challenges, whereas tokens simplify the ownership process, thereby democratizing gold access.

Challenges and Risks to Keep in Mind

Despite the fast growth of gold-backed tokens, potential risks remain important to consider. Melikhov points out custodial and regulatory challenges as significant hurdles. Investors must be assured that the gold backing their tokens is genuine, remains untethered, and is redeemable when necessary.

Illia Otychenko, lead analyst at CEX.IO, agrees, stating that transparency and trust are critical issues. Investors require evidence of the gold’s existence and full backing.

For instance, a Q2 attestation published by Tether on July 24 reaffirmed that XAUt is backed by over 7.66 tons of physical gold. Following this affirmation, XAUt's trading volume confidently surpassed that of both PAXG and KAU. Furthermore, shortly afterward, XAUt achieved the largest single-day supply increase in the history of tokenized gold.

While maintaining transparency is essential, liquidity remains another challenge. Melikhov notes that only a few exchanges currently offer substantial trading platforms for gold-backed crypto tokens.

| Venue Type | Specific Example | Reason for Strong Liquidity
|------------|------------------|------------------
| Major Centralized Exchanges (CEX) | Binanace, Kraken, Coinbase, Crypto.com, etc. | PAXG is listed here, contributing to its strong trading activity. | Derivatives & Futures Exchanges | Deribit | PAXG futures/options added to Deribit attract institutional traders for hedging strategies. | Decentralized Exchanges (DEXes) | Uniswap, Curve, etc. | DEX trading volumes for PAXG and XAUT have recently reached all-time highs. | Cross-chain/Real-World Asset/Tokenization Platforms | Paxos and related custody platforms | Due to physical gold backing and redeemability, PAXG is likely to see better depth in trades.

The Future of Gold-Backed Crypto Tokens

Looking ahead, despite certain challenges, gold-backed crypto tokens are poised for strong performance. Their success will depend on several fundamental factors, including anticipated cuts in U.S. interest rates, global geopolitical tensions, trade policies, and rising government debt.

In Tapscott's view, over the next few years, the market for tokenized real-world assets could reach trillions, with gold positioned as one of the major beneficiaries. "Tokenizing gold is merely one of many ways in which blockchain technology is modernizing finance," he stated.