Tokenized Gold Surges as Investors Seek Stability Over Yield Pledges

Yield products continue to underperform investor expectations as tokenized gold surges to record market capitalization, signaling a shift in preferences toward tangible assets and blockchain-backed alternatives. The market for tokenized gold has hit $2.57 billion, driven primarily by Tether's XAUT and Paxos' PAXG, according to recent data from CoinGecko and DefiLlama. This growth follows substantial inflows into these tokens—Tether minted $437 million worth of XAUT in August, while Paxos added $141.5 million to its PAXG holdings since June.

Investors are increasingly drawn to tokenized gold as physical gold prices approach their April peak of $3,470 per troy ounce. The rise in traditional gold prices, coupled with broader economic uncertainties such as inflation and U.S. Federal Reserve policy ambiguity, has spurred a renewed appetite for safe-haven assets. This trend is further reinforced by tokenized gold’s unique ability to blend physical asset security with blockchain liquidity and accessibility. The tokens are backed one-for-one by physical gold, making them a more stable and tangible alternative to traditional yield products, which have historically failed to meet investor expectations.

The demand for tokenized gold has been amplified by recent developments in the asset tokenization space. SmartGold, a provider of gold-backed Individual Retirement Accounts (IRAs), is tokenizing $1.6 billion in vaulted gold through a partnership with Chintai Nexus. This move allows investors to use tokenized gold as collateral on DeFi platforms such as Morpho and Kamino, enabling liquidity in USD while preserving the tax-advantaged status of the IRA. The initiative highlights the growing role of tokenization in expanding investment opportunities within retirement portfolios, with self-directed IRAs representing 2% to 5% of the $10.8 trillion U.S. IRA market.

The broader real-world asset tokenization trend is also gaining traction. Tether Gold (XAUT), backed by the same firm that issues USDT, has seen significant momentum, with its supply reaching $1.3 billion. Meanwhile, Paxos’ PAXG token has grown to $983 million, reflecting the confidence of institutional and retail investors alike in blockchain-backed commodities. These tokens are not just financial instruments but also bridge the gap between traditional asset classes and decentralized finance, offering a hybrid solution for those seeking both stability and innovation.

Analysts suggest that the rise of tokenized gold reflects a broader shift in the investment landscape, where investors are increasingly prioritizing transparency and physical backing over speculative yield-generating products. As the market continues to expand, tokenized gold is carving out a niche in the digital asset ecosystem. This growth is particularly evident in markets like the U.S., where regulatory clarity and institutional interest have fueled crypto adoption. The U.S. now ranks second in the Chainalysis 2025 Global Crypto Adoption Index, with institutional demand rising in tandem with retail adoption in emerging markets.

Despite its growth, the tokenized gold market remains relatively small compared to the broader gold market. However, its rapid expansion and increasing integration with DeFi protocols suggest that it may continue to grow in both size and influence. As investors continue to seek alternatives to traditional yield products, tokenized gold appears well-positioned to meet the demand for stable, blockchain-verified returns in a volatile financial environment.

Source: [1] SmartGold, Chintai to Tokenize $1.6B in IRA Gold (https://cointelegraph.com/news/smartgold-chintai-ira-gold-tokenization) [2] Tokenized Gold Market Tops $2.5B Led By Tether, Paxos (https://www.coindesk.com/markets/2025/09/01/tokenized-gold-market-tops-usd2-5b-as-the-precious-metal-nears-record-highs) [3] Tokenized Gold Hits Record Market Cap of $2.57B (https://www.cointribune.com/en/tokenized-gold-xaut-paxg-market-cap-2025/) [4] US Crypto Adoption on the Rise Following 'Regulatory ... (https://finance.yahoo.com/news/us-crypto-adoption-rise-following-120103061.html)