The intersection of digital assets and physical commodities has given rise to a new breed of cryptocurrencies – gold-backed digital currencies. These digital assets combine the stability and intrinsic value of gold with the transparency and decentralization properties of blockchain technology.
In 2024, the market for gold-backed cryptocurrencies has experienced significant growth, attracting both investors seeking stability and crypto enthusiasts looking for exposure to the $12 trillion gold market.
In this article, we will explore the best gold-backed cryptocurrencies that have emerged as top options in recent years.
Here’s a quick list of the best gold-backed cryptocurrencies in 2024:
- PAX Gold (PAXG)
- Tether Gold (XAUT)
- GoldCoin (GFC)
- Kinesis Gold (KAU)
- Meld Gold (GOLD$)
- tGOLD (TXAU)
Before we examine each of these gold-backed digital assets in detail, let’s quickly examine what it means for crypto to be backed by gold.
What are gold-backed cryptocurrencies?
Gold-backed cryptocurrencies are digital tokens that are backed by physical gold reserves. These cryptocurrencies combine the features of traditional gold ownership with the advantages of blockchain technology. Each token represents a certain amount of gold, usually measured in weight (e.g., ounces or grams).
Gold-backed digital currencies are a type of stablecoindue to their characteristic of being pegged to the value of gold. In this sense, gold-based cryptocurrencies are similar to fiat-backed stablecoins, like Tether (USDT) and USD Coin (USDC), which allow investors to benefit from blockchain design but enjoy the stability of real-world assets with low volatility.
Gold-backed crypto assets allow investors to gain exposure to the $12 trillion gold market.
6 best gold-backed crypto options in 2024: Examining top gold-linked digital assets
Gold has gained +5.4% year-to-date (YTD), currently trading at $1,922. In the past 5 years, the asset has grown by over +53%, posting similar gains to the US Stock Market Index S&P 500, which gained +61% in the same period. In the sections that follow, we are going to examine the best gold-backed cryptocurrencies.
1. PAX Gold (PAXG)
PAX Gold, an ERC-20 token, is fully collateralized by one fine troy ounce of gold. PAX Gold is built on the Ethereum blockchain, providing investors with easy accessibility and seamless transferability. At the time of writing, PAXG is the largest gold-back digital asset in the crypto market, commanding a market capitalization of $482 million.
The token is compliant with regulatory frameworks (a license with the New York Department of Finance Services), ensuring a trusted and secure investment experience. Contrary to other gold-focused investment vehicles, PAXG charges no custody fees, has an instant settlement time, and is instantly redeemable for physical gold.
2. Tether Gold (XAUT)
Tether Gold, a product of the popular stablecoin company Tether, has gained immense popularity among crypto investors. At the time of writing, Tether Gold is the second largest gold-backed currency by market cap.
Each XAUT token represents one troy ounce of gold held in a Swiss vault. According to Tether, there are currently 611 gold bars stored in the vault, with a combined weight of more than 7.6 tonnes. XAUT provides gold investors with enhanced divisibility (tokens are divisible into increments as small as 0.000001 fine troy ounce of gold) and easy storage options (no need to take care of physical gold).
3. GoldCoin (GFC)
GoldCoin is an ERC-20 gold-backed cryptocurrency on the Ethereum network. With GFC, investors get access to a fractionalized gold-backed asset that can be bought with either fiat or crypto. Every GFC is backed by 1/1000th of a gold ounce stored in vaults.
GoldCoin is positioning itself as an affordable alternative and private alternative to owning gold in a digital form. There is no identification required to purchase GFC, which gives investors the ability to gain exposure to gold markets without having to file any paperwork.
4. Kinesis Gold (KAU)
Kinesis Gold is a cryptocurrency project that is backed by physical precious metals. The Kinesis platform features two such tokens, Kinesis Gold (backed by gold) and Kinesis Silver (backed by silver). Both tokens leverage the interoperability of Stellar’s blockchain technology and can be transferred on the Kinesis Blockchain Network.
Kinesis has more than 150,000 users worldwide and manages over $200 million in assets under management (AUM). Both silver and physical gold bars are stored in secure vaults, allowing users to keep their savings securely deposited with assets with low volatility. Each KAU token represents 1 gram of gold.
5. Meld Gold (GOLD$)
Meld Gold is a token issued on the Algorand blockchain that represents physical gold. More specifically, one GOLD$ token represents one gram of gold, which token holders can redeem for real gold through the Meld Gold project's partners.GOLD$ tokens can be purchased on the BTCMarkets cryptocurrency exchange or on various Algorand-based decentralized exchanges such as Pact.fi.
The team behind the Meld Gold token provides a live audit website where users can check key facts related to GOLD$, such as where the gold backing the token is being stored, and the number of holders of GOLD$ tokens. At the time of writing this article, roughly $4.6 million worth of gold is tokenized through GOLD$.
Since Algorand is one of the cheapest cryptos to transfer, transacting with GOLD$ tokens is highly efficient with minimal fees and fast confirmations.
6. tGOLD (TXAU)
The tGOLD token, which trades under the ticker TXAU, is a gold-backed token launched by Aurus. TXAU tokens can be purchased through decentralized exchanges such as Uniswap or from various precious metals businesses that have partnered with Aurus. The token is also traded on the CEX.io cryptocurrency exchange.
TXAU tokens are issued on the Ethereum blockchain, but are also compatible with Polygon for users who prefer the lower fees offered by the platform.
Users who choose to tokenize their gold via the Aurus platform are rewarded with 50% of the fees associated with tGOLD. Of course, the amount that you can earn in this way depends on the amount of gold you have tokenized.
The bottom line: Crypto-backed cryptocurrencies allow you to gain exposure to gold easily
Cryptocurrencies backed by gold allow investors to gain exposure to the precious metals without having to pay high transaction fees and storage fees usually associated with buying and storing gold.
Investing in gold is usually considered a good investment for the long term – if you want to invest in digital currencies that have characteristics of long-term investments, check our list of the best cryptos to buy for the long term. If you want to invest in other metals that have significant real-world utility, check our selection of the best nickel stocks to invest in.
