Tokenized Gold Explained: What It Is and Where to Buy (2025)

What Is Tokenized Gold?

Tokenized gold represents physical gold digitized and minted on a blockchain. These tokens are backed by an equivalent amount of real gold held in custody by the issuing institution.

Key Takeaways

• Gold tokenization converts physical gold into digital tokens on a blockchain, where the real gold is held by the issuer as backing for the tokens. 

• Holders can typically redeem tokens for physical gold based on the issuer’s terms and conditions.

• Tokenizing gold increases gold’s accessibility by allowing for fractional ownership, easier trading, and use in decentralized finance. 

• Major issuers of tokenized gold include Tether’s XAUT and Paxos’s PAXG, whose tokens can be held in crypto wallets and traded on exchanges.

Gold is a traditional store of value with a market cap of over $20 trillion. However, it has historically faced accessibility and trading challenges, as it’s a physical asset. While instruments like gold ETFs exist, they operate within regulated, centralized systems and may not offer direct ownership or physical redemption rights to retail investors. 

Gold tokenization involves leveraging blockchain technology to create a potentially more transparent and efficient global marketplace for gold. In the past 5 years, this category has grown in relevance. According to data from CoinGecko, the tokenized gold market is now worth over $2 billion at the time of writing, and it is emerging as a narrative to watch in 2025.

Understanding Tokenized Gold

Tokenized gold allows users to hold representations of physical gold in their crypto wallets, where the real gold is held in custody by the issuing institution. These tokens are typically pegged to specific weights of gold such as:

• Troy ounce: A unit of measurement for precious metal weight. A troy ounce is equal to 31.1 grams. Tether Gold’s XAUT and Paxos Gold’s PAXG are pegged to the troy ounce.

• Gram: A common unit of weight measurement. Kinesis Gold’s KAU and VeraOne’s VRO are pegged to the gram. 

On the blockchain, where fractions of tokens can be bought and sold, investors can acquire tokenized gold according to their investment capacity. This effectively dismantles barriers to entry like minimum purchase amounts, as users can buy fractions of a gram.

How Does Gold Tokenization Work?

Gold tokenization involves real gold held in a vault as backing, smart contract technology that governs the mint and redemption process, and third-party auditors that verify gold holdings correspond to the token supply.

Here’s how the process of gold tokenization works:

1. Gold acquisition and storage: An issuing institution purchases physical gold and stores it in high-security vaults.

2. Token minting: Using smart contracts, the issuer mints digital tokens on a chosen blockchain equivalent to the amount of gold held. Usually fungible token standards like ERC-20 are used.  

3. 1:1 backing and pegging: Each token corresponds to a specific amount of physical gold (1 XAUT = 1 troy ounce). 

4. Transparency and attestation: Issuers release regular audits to publicly attest that the value of gold in their vaults corresponds to the circulating token supply, with information usually available on the issuer’s website. 

5. Distribution and trading: Tokens are sold directly or listed on centralized (CEX) and decentralized (DEX) exchanges, enabling 24/7 trading against fiat money, stablecoins, or other cryptocurrencies.

6. Redemption and burning: 

   • Physical gold: Holders can redeem tokens for physical gold bars at a rate of 430 troy ounces/tokens with Paxos and Tether Gold. This process usually involves additional fees and logistical arrangements (limited to specific regions). 

   • Cash/Unallocated Gold: Some issuers like Paxos allow redemption of smaller amounts into USD or unallocated gold entitlements (an entitlement to gold in a shared reserve), subject to fees and other prerequisites. 

   • Token burning: Redeemed tokens are burned on-chain to maintain the 1:1 gold backing.  

Benefits of Gold Tokenization

Tokenized gold improves the accessibility of gold and allows the regular investor access to the gold market. Benefits of gold tokenization include:

Accessibility and Fractionalization

Tokenized gold opens gold investment to a global audience and lowers the entry threshold for gold investment, allowing users to purchase minute fractions on exchanges. As an example, Binance supports denominations as low as 0.0000031 PAXG (~$0.01). 

Improved Liquidity and Efficiency

Users can trade tokenized gold 24/7 on global crypto markets, offering them potentially greater liquidity and faster settlement times compared to the constraints of traditional market hours and the hassle of physical gold transfers. So far, over $2 billion has flowed into the crypto market through tokenized gold.

Transparency

The immutability of blockchain ledgers provides a permanent, publicly verifiable record of token transactions. When combined with regular third-party audits, which allows users to verify reserves backing their tokens, tokenized gold offers holders a high level of transparency and reassurance around their assets.

DeFi Integration

Tokenized gold can be supplied to liquidity pools to earn fees, or can be used as collateral in DeFi lending protocols where supported. This unlocks access to additional yield generating activities unavailable with traditional gold holdings. 

Cost Efficiency and Storage

Tokenized gold issuers don’t charge custody fees, and users can easily swap fractions of tokenized gold for stablecoins, other cryptocurrencies, or fiat money through exchanges. Regardless of the blockchain they are minted on, fees paid for each transaction are significantly less than the cost of processing a gold sale or purchase transaction. Meanwhile, physical gold is comparatively harder to spend and transfer.

In addition, tokenized gold inherits the rigid security of the blockchain. Gold tokens held in personal wallets and protected using recommended security measures are technically safe from theft. Tokenized gold holders can store their tokens in hot wallets (usually free) or cold (offline) wallets, which cost significantly less than gold vaults.

The cost efficiency and ease of storage of tokenized gold also offer institutional benefits. Firms looking to diversify into the gold market can easily purchase tokenized gold, pay comparably low transaction fees, and secure their portfolio using cheaper (relative to building a vault) methods.

Challenges and Risks Around Gold Tokenization

While gold tokenization brings accessibility and multiple other benefits, it is not immune to challenges and risks. Some of these include:

Regulatory Uncertainty

Like other cryptocurrencies, the regulatory framework governing tokenized gold is still developing. Due to the popularity of gold as an asset, it may also attract more attention from regulatory bodies. Evolving regulations may impact issuance, trading, taxation, and issuer requirements, while jurisdictional differences can create further complexity.

Depending on how the regulatory structure of tokenized gold develops, it could evolve into something similar to ETFs and other mainstream investment instruments. 

Market Volatility

Due to the nature of crypto trading and the crypto trading environment, sentiment and liquidity can also impact token price, potentially leading to premiums or discounts compared to spot gold. For example, at time of writing, XAUT is priced at $3,272.58 while PAXG is priced at $3,277.10, while spot gold is listed at $3,263.81 on Bloomberg.

Moreover, for users looking to use tokenized gold to farm yield through liquidity provision, there is the added risk of impermanent loss. 

Custodial Concerns

With tokenized gold, the issuer is responsible for safeguarding the physical gold and accurately maintaining the 1:1 backing. By relying on a centralized institution, there is the risk of issuer mismanagement or insolvencies and smart contract vulnerabilities. 

When selecting a tokenized gold issuer, users can do research on smart contract audits and third-party attestations. For example, the PAX Gold smart contract was formally verified by CertiK, with monthly attestations done by KPMG. 

Where to Buy Tokenized Gold?

While there are multiple tokenized gold issuers, we’ll look at the two largest issuers in the space: Tether Gold (XAUT) and Paxos Gold (PAXG).

Tether Gold (XAUT)

Tether Gold (XAUT) is launched by the same company behind USDT. XAUT is pegged to the value of one troy ounce of physical gold held in a Swiss vault by the issuer, and each token can be fractionalized to as low as 0.000001 XAUT. Since launching in 2020, Tether Gold has grown to a market cap of over $806 million, which corresponds to the worth of gold under the issuer’s management (AUM), according to audit reports by BDO as of 31 March 2025.

XAUT is minted on the Ethereum blockchain as an ERC-20 standard token, and on the Tron Network as a TRC-20 standard token. 

Tether Gold is the largest tokenized gold token by market cap, and can be bought and sold on top centralized crypto exchanges like Binance, Bybit, OKX, Bitget, and MEXC. It can also be traded on decentralized exchanges on Ethereum, such as Uniswap. Here’s the full list of active XAUT trading pairs.

PAX Gold (PAXG)

Paxos Gold (PAXG) is one of the earliest tokenized gold tokens, and was launched in September 2019. Paxos is regulated by the New York State Department of Financial Services (NYDFS), with its gold reserves audited monthly by KPMG. 

Each PAXG token is pegged to one troy ounce of gold, and tokens are issued on Ethereum as ERC-20 tokens. As PAXG tokens can be fractionalized up to 18 decimal places, users can opt to buy tiny fractions of a token, based on their investment capability (although a minimum purchase of 0.01 PAXG applies when buying from Paxos).

To date, over 237,000 PAXG tokens have been issued by the firm, with a market cap of over $778 million (at the time of writing), which corresponds to the reported AUM by the firm. 

Paxos Gold also enjoys a wide industry acceptance, with the asset tradable on top centralized exchanges like Binance, Crypto.com, Gemini US, Kraken, and MEXC. PAXG is also available on decentralized exchanges on Ethereum like Uniswap. Here’s the full list of active PAXG trading pairs. 

Final Thoughts

At time of writing, the total market capitalization for tokenized gold is over $2 billion based on CoinGecko data, signifying both retail and institutional interest in this asset class. 

Since early 2024, tokenized gold has been steadily growing as a category, as it combines gold’s appeal as a safe-haven asset with blockchain’s transparency and efficiency. With the blockchain, tokens can be fractionalized to as low as 18 decimal places, offering investors unprecedented accessibility. At the same time, through DeFi, investors can also put their gold holdings to work generating yield through liquidity provision and other DeFi integrations, where supported.

However, potential investors should still do their due diligence around the issuer’s regulatory standing and audit transparency, while understanding associated risks, such as impermanent loss in DeFi, along with the market volatility present in the crypto space. 

Finally, note that this article is for informational and educational purposes only, and should not be taken as financial advice. Featured projects are not endorsed by CoinGecko, and users should always conduct their own research before investing in any cryptocurrency or blockchain project.