Tokenized gold
Also called: gold token · gold-backed token · PAXG · XAUT
Definition
Tokenized gold is a blockchain token backed by physical gold held in a vault, where each token represents a set amount of gold, often one fine troy ounce.
This entry is shown in English.
How Tokenized gold works
The issuer buys gold bars, stores them with a vault provider and issues tokens against them. Pax Gold (PAXG), issued by Paxos, and Tether Gold (XAUT) are the best-known examples, with each token representing one fine troy ounce of gold. Holders can trade the token on exchanges, move it on-chain or, under certain conditions, redeem it.
The advantage is that you can hold gold exposure in a crypto wallet, trade in small fractions and move value at any time of day. The token price follows the gold spot price closely, though small premiums or discounts can appear when crypto markets are trading and traditional gold markets are closed.
Your safety depends on the issuer's honesty, regular audits or attestations of the gold reserves, and the legal right to redeem. Physical redemption often has minimum amounts and fees, and some products allow redemption only for verified customers. Check these details for any gold token you hold.
Example
Suppose gold trades at 2,400 USD per ounce and one token represents one ounce. You buy 0.25 tokens for about 600 USD. If gold rises 5% to 2,520 USD, your 0.25 tokens are worth about 630 USD. If you instead wanted to redeem for a physical bar, a minimum of, say, 400 ounces could apply, which would be about 960,000 USD at 2,400 USD per ounce.
Common mistakes
- Assuming every gold token is equally audited and redeemable.
- Expecting to redeem a small balance for physical gold when minimums apply.
- Confusing a gold-backed token with a token that only tracks gold price through derivatives.
Learn and practise
FAQ
Is PAXG backed by real gold?
Paxos states that each PAXG is backed by one fine troy ounce of gold held in professional vaults, with regular reserve attestations.
Can I redeem tokenized gold for physical gold?
Some issuers allow it for verified customers, usually with minimum amounts and fees. Smaller holders typically sell the token for cash or stablecoins instead.