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Blockchain Certification

Going for Gold?


A Research Primer on Gold-Backed Crypto Tokens

The investment case for gold, an analysis of gold-backed tokens compared to other ways of owning gold, and gold vs bitcoin.


With the current COVID-19 crisis, and unprecedented monetary and stimulus response, many investors have turned their attention towards hard assets such as bitcoin and gold. Over the last twelve months since April 2019 the price of gold is up approximately 35%. Given the current financial uncertainty many analysts are forecasting that gold will set a new all-time high.

Alongside growing demand for gold, interest in gold-backed digital tokens, which can be transacted and stored on cryptocurrency exchanges and wallets, has also grown of late. Since September 2019 a number of new gold-backed tokens have been issued from established crypto companies, such as Tether, Paxos and, and the total value of gold-backed tokens has grown by over 16x in the past year to more than $160m in value.

The purpose of this research report is to provide a brief overview of the general investment case for gold, both as a standalone investment and alongside cryptoassets prized for their algorithmically governed scarcity, such as bitcoin (BTC). The report also provides an overview and comparison of the leading gold-backed digital tokens.

Report Highlights

  • Gold-backed tokens offer numerous advantages over traditional gold: 24/7 transaction availability, improved transferability, ease of usability (via internet), and low cost of ownership
  • Size of gold-backed token market up more than 16x in last year: three new gold-backed tokens have led the combined sector value from less than $10m to >$160m; there are now at least eight gold-back tokens in circulation
  • Three gold-backed tokens currently dominate: Tether Gold (XAUT) $87m market value, PAX Gold (PAYG) $44m market value, and DGLD¹ (DGLD) $25m market value together currently make up 94% of gold token total category market value
  • Significant differences exist across gold-backed tokens such as measurement/peg to gold, cost of ownership and use, blockchain certification platform choice, storage location of gold backing the token, and options for converting the token into physical gold
  • Overall, gold-backed tokens complement both traditional ways of owning gold and pure cryptoassets like bitcoin: gold-back tokens do not wholly replace reasons to own physical gold, and if an investor owns pure digital assets such as bitcoin (BTC) as a hard asset they should also in our view carefully consider gold

The ancient and eternal allure of gold

Gold has one of the longest, if not the longest, track records of use as a store of value and medium of exchange. The archaeological record is not entirely clear on when humans first discovered and began using gold as jewelry and for other purposes, but one of if not the first use of gold as a monetary instrument is known to have emerged in the Kingdom of Lydia (located in Turkey) around the sixth century BC.²

Lydian gold coins

Much has been written through the centuries about the use of gold as a store of value, monetary asset, and general object of desire. Rather than recount this rich and interesting history, this report will focus on the modern investment case for owning gold in different forms, as well as how gold compares to pure cryptoassets like bitcoin.³

Beyond its wide global use in jewelry and other activities (e.g. dental work, electronics, as an industrial metal), much of the investment case today for gold revolves around its historical role as a hard asset and store of value. These properties are illustrated by how gold’s price often rises in times of economic, financial and political turbulence. For example, during recessions gold has tended to appreciate in value (Figure 1). During major wars gold’s price appreciation has often been even more dramatic. Gold is often referred to as the ultimate “safe haven” asset.

Figure 1: Hard assets like gold have often performed well during economic downturns and periods of financial instability.


Central banks and gold

In addition to its traditional role as a hard asset and safe haven, today gold is widely held in significant quantities as a reserve asset by many of the world’s governments, central banks and multilateral institutions (Table 1).

Of the estimated 190,000 tonnes of gold ever mined, approximately 35,000 tonnes (18%) is held today by public sector institutions.⁴ For some countries, such as the United States, this is simply a legacy of the gold standard and Bretton Woods era, where currencies were linked and convertible into gold, a practice which ended for the US dollar in 1971. Since US President Richard Nixon took the US off the gold standard in 1971 the US dollar has declined in value against gold by 98% (gold has appreciated from $38/oz to approximately $1,700 as of April 2020).

Since US President Richard Nixon took the US off the gold standard…