Gold prices have gained 4.67% since the start of February, hitting a multi-month high. And thus accelerating the trade volume of gold-backed stablecoins, which are digital tokens backed by physical gold. According to a report by Kaiko, the two largest gold-backed stablecoins by trade volume are Tether Gold (XAUT), with a market cap of $200 million, and PAX Gold (PAXG), with a market cap of $420 million. Fascinatingly, PAX Gold volumes have practically doubled since September and Tether Gold volumes have seen a subtle burst in trading.
Gold as certainty in uncertain times
Overall, USD-pegged stablecoins remain dominant with regard to market cap and trade volume, with gold-backed stablecoins offered on only a small number of exchanges. Nevertheless, this unique investment product seems more familiar to traditional investors. As a result, many perceive gold in conventional financial markets as a barrier to inflation and a safe haven in geopolitical tension. Since the gold tokens are tied to the price of the precious metal, the rising market capitalization merely represents an increase in the number of tokens outstanding: While commodity-backed tokens have seen a surge, still the market value of the gold tokens – now around $800 million combined – pales in comparison with Bitcoin’s $833 billion. In addition, in recent years, price movement on gold has been feeble compared with many cryptocurrencies, whose prices have bulged by many multiples.
