Gold Surge: Crypto Backed by Precious Metal Outperforms Market

Gold-backed cryptocurrencies have been outperforming the broader crypto market, with inflows into precious metal exchange-traded funds (ETFs) reaching a three-year high. This trend has been driven by growing demand for gold, which has seen significant inflows into ETFs, particularly in North America.

According to the World Gold Council, physically-backed gold ETFs saw their largest weekly inflow since March 2022, with inflows of 52.4 tons, or roughly $4.9 billion. This has contributed to a total of 3,326 tons worth approximately $314 billion in gold ETF holdings.

Gold prices have been on the rise, with a year-to-date increase of nearly 11% and a 43% year-over-year gain. The current price stands at $2,910 per ounce. Analysts attribute this growth to factors such as geopolitical tensions and uncertainty surrounding potential Trump tariffs.

Gold-backed cryptocurrencies, such as Paxos Gold (PAXG) and Tether Gold (XAUT), have been tracking the metal's price and have outperformed the broader crypto market. The CoinDesk 20 Index shows a 26% year-over-year increase in the crypto market.

Data from RWA.xyz indicates that over $25 million worth of commodity-backed tokens were minted this month, the largest monthly volume since December 2022. Around $12 million were burned during the same period.

Despite the rising demand for gold, supply has remained relatively stable. The World Gold Council reports that mining production in the fourth quarter of last year dropped by around two tons compared to the previous quarter. However, hedging and recycling grew, resulting in a total tracked supply increase of around 1% year-over-year.