Tokenized Gold Surges Past $4 Billion as Tether Overtakes Central Banks in Gold Buying

Gold-Backed Stablecoins: A Growing Market

Gold-backed stablecoins have surged to a total market capitalization of nearly $4 billion, driven by growing investor interest in tokenized precious metals amid macroeconomic uncertainty and geopolitical tensions. The sector, which was valued at approximately $1.3 billion at the start of 2025, has nearly tripled in value, largely fueled by the performance of gold itself, which has risen roughly 66% year-to-date. This development marks a shift as crypto investors increasingly seek exposure to traditional safe-haven assets while remaining onchain.

Tether Gold (XAUt) leads the market with approximately $2.2 billion in market capitalization, accounting for 50% of the total gold-backed stablecoin sector. Paxos Gold (PAXG) follows closely at around $1.5 billion. Together, these two protocols dominate nearly 90% of the tokenized gold market. XAUt recently overtook PAXG in market share following aggressive supply expansion throughout 2025.

These tokenized gold products represent fractional ownership of physical gold bars stored in secure vaults, allowing for a new form of onchain investment in a traditional asset. Investors are increasingly drawn to the combination of gold's stability and the flexibility of digital tokens, which offer high liquidity and the ability to trade 24/7 on global exchanges.

Why the Standoff Happened

Tether has emerged as a major institutional gold accumulator, surpassing most central banks in its quarterly gold purchases. The company added 26 tons of gold in the third quarter alone, bringing its total holdings to 116 tons by end-September 2025. According to IMF data, Tether now ranks among the top 30 global gold holders, placing it ahead of countries like Greece, Qatar, and Australia.

The broader appeal of tokenized gold is also being bolstered by rising demand for assets that offer protection against inflation and monetary devaluation. Gold prices have been driven higher by persistent macroeconomic uncertainty and geopolitical risks, creating a favorable environment for both physical and tokenized gold adoption. These conditions have led to significant inflows into blockchain-based gold products.

How Markets Reacted

The tokenized gold market is not alone in seeing growth. The broader stablecoin market has also reached new record levels, with a total market capitalization approaching $310 billion. Despite a recent crypto market downturn, stablecoin market caps have continued to climb, indicating strong investor interest in these assets even amid volatility in other crypto sectors.

Tether's U.S. dollar-pegged stablecoin continues to dominate the market, with a 60% share of the stablecoin market. The growth in stablecoin supply and market cap has been steady, with the sector up more than 50% year-to-date. This growth suggests a continued flow of capital into crypto rails, with stablecoins acting as a bridge between traditional finance and digital assets.

What This Means for Investors

For investors, gold-backed stablecoins like XAUt and PAXG offer unique advantages over traditional gold investment methods. These tokens eliminate the need for high storage and insurance costs associated with physical gold, while also providing greater liquidity and ease of transfer according to market analysis. Unlike physical gold, which requires shipping and delivery, XAUt and PAXG can be traded instantly on global exchanges, allowing for more efficient portfolio management.

XAUt, in particular, is gaining traction as a hedging tool in a macroeconomic environment marked by inflation and Fed policy uncertainty. The token's value moves in tandem with the international gold price, making it an attractive option for investors looking to capture the upside of a rate-cutting cycle. Additionally, the token's high divisibility allows for fractional ownership as small as 0.000001 ounces, making it accessible to a wide range of investors.

Recent market performance has further underscored XAUt's appeal. Driven by expectations of Fed rate cuts, the price of gold has rebounded to record levels, with XAUt fluctuating in line with these movements. This strong performance has reinforced XAUt's value as a digital safe-haven asset, particularly as real interest rates decline and the opportunity cost of holding gold decreases.

Risks to the Outlook

Despite the growing appeal of gold-backed stablecoins, investors should remain cautious of potential risks. These include regulatory uncertainties, as the tokenized gold market continues to evolve in a rapidly changing legal environment. Additionally, the reliance on third-party audits and transparent gold reserves is crucial for maintaining trust in these assets according to market experts.

Market volatility is another factor to consider. While gold-backed stablecoins are generally more stable than other crypto assets, they are still subject to broader market trends and can experience sharp price swings during periods of high uncertainty. Investors must also be aware of the potential for liquidity issues, particularly in times of significant market stress.

As the tokenized gold market continues to expand, investors are likely to see more competition and innovation. New entrants, such as DGLD®-a gold token launched on the Base network, highlight the increasing diversity of options available to investors seeking exposure to tokenized precious metals. This competition could drive improvements in security, transparency, and user experience, further solidifying the role of tokenized gold in the global financial ecosystem.