The Top Gold-Backed Cryptos

A gold-backed cryptocurrency is a token whose value is underwritten by an equivalent amount of physical gold. Essentially, a gold-backed cryptocurrency tokenizes the ownership of physical gold and stores that information on an immutable public ledger, called a blockchain.

Here at Ledgernomic, we’ve tried to find the best gold-backed cryptocurrencies on the market. In doing so, we tried our best to find products that fulfilled the following criteria as much as possible:

1. Each token should be fully backed by physical gold
2. The physical gold should be custodied in a secure location
3. Zero or very low fees compared to other gold derivatives
4. Regulated and/or audited

Gold as an Investment

People have used gold as a store of value and wealth protection vehicle for thousands of years. Today, many people hold gold to diversify their portfolios and hedge against downside price risk and inflation. Investors also traditionally pivot towards gold during times of uncertainty.

What are the advantages of Gold-Backed Cryptos over other forms of gold ownership?

While gold is a time-tested investment and store of value, one of its most common criticisms is that its difficult to transport and therefore arguably not as liquid as other investments. It also has the disadvantage of high storage costs for those who don’t want to self-custody.

A reputable gold-backed cryptocurrency has some of the advantages of both gold and digital assets.

Tokenized gold is divisible and fungible, allowing investors to trade in and out of it more easily than they would other types of gold investments.

Gold-backed crypto vs Other Gold Derivatives

There are other ways to get exposure to gold, without actually purchasing the physical metal. These include gold ETFs, gold futures, and gold mining stocks.

When compared to other types of gold derivatives, most tokenized gold-backed cryptocurrencies give investors a claim to redeem for physical gold. Some well-known gold funds merely track the price of the underlying asset. Instead of allowing the investor to redeem physical gold, many gold derivatives require the issuer to pay the investor the gold price equivalent in fiat currency. This might not be an issue for all investors, but it’s certainly something to consider.

Another advantage investors might want to consider, is the fact that the trading market for gold-backed cryptos is open 24/7.

The Top Gold-Backed Cryptocurrencies

PAX Gold

The first gold-pegged crypto on our list is PAX Gold (PAXG). PAXG is issued by Paxos Trust Limited, a regulated blockchain company with a host of high profile customers and backers, including Paypal, Meta, Credit Suisse, Societe Generale, StoneX and Revolut. In particular, Paxos is regulated by the New York State Department of Financial Services as a trust company and custodian.

Read more: Paxos gets Singapore payments license.

Each PAX Gold token is backed 1:1 by a fine troy ounce (t oz), which are allocated and custodied in professional gold vaults in London. It’s important to note that while your gold is allocated and custodied in a secure vault, there are no storage fees.

In addition, every month an external auditor ensures that the supply of physical gold matches the supply of PAXG tokens.

Redemption of PAXG Tokens

It’s possible to redeem PAXG tokens for LBMA-accredited Good Delivery gold bullion bars. If investors own smaller amounts, they can redeem PAXG tokens through a network of physical gold retailers.

On Chain Transaction Fees

Due to the fact that PAXG is an ERC-20 token built on the Ethereum blockchain, on-chain transactions are subject to gas fees, which are potentially quite expensive. On-chain transactions occur where you send the token from one Ethereum address to another (so for example where you wanted to transfer from an exchange to your private wallet).

Exchanges and Liquidity

PAXG is a gold-backed crypto that’s available on a number of well-established cryptocurrency exchanges, so it is easy to trade and convert into other cryptocurrencies, fiat and stablecoins. At the time of writing, both Kraken and FTX have PAXG/USD trading pairs. Binance allows users to trade directly into BUSD (Binance’s dollar-backed stablecoin) and USDT (US dollar Tether), as well as bitcoin.

Read the PAXG Whitepaper.

Tether Gold

Tether Gold (XAUt) is a gold-backed cryptocurrency offered by TG Commodities Limited. According to the official Tether website, “each XAUt token represents ownership of one troy fine ounce of physical gold on a specific gold bar“. Like their flagship dollar-pegged offering, Tether’s gold-backed cryptocurrency is also available as both an ERC-20 (Ethereum blockchain) or a TRC-20 (Tron blockchain) token.

The physical gold which backs Tether’s crypto token is held at a Swiss vault (the exact custodian is not specified on the website). There are no storage fees, however, there are small fees associated with the buying, selling and transfer of the token. For example, there is a one-off fee of 25 basis points if purchased directly from TG Commodities Limited.

Redemption for Physical Gold

It’s possible to redeem XAUt tokens for physical gold, however in order to request redemption an investor must hold one full bar of gold worth of tokens.

Exchanges and Liquidity

If purchasing directly from TG Commodities Limited there’s a minimum purchase amount of 50 XAUt or 50 fine troy ounces (at the time of writing around $100,000). Smaller denominations can be purchased from the handful of exchanges that support the token.

Tether Gold is currently available on the following exchanges:

• Bitfinex
• FTX
• Celcius
• BTSE
• BigOne
• Gate.io

Perth Mint Gold Token

Perth Mint Gold Token (PMGT) is the first token backed by government-guaranteed gold (for better or worse you decide!). PMGT is a collaborative effort between the Perth Mint and the Trovio, a Sydney-based Australian fintech company.

PMGT is a bit different from the other gold-backed cryptos in this article. Each token represents ownership of a “GoldPass digital certificate”, which is issued by The Perth Mint. Each GoldPass certificate is 100% backed by physical gold, which is held at the Perth Mint.

Like other gold-backed cryptos, there are no storage or management fees for PMGT.

Redemption for Physical Gold

It is possible to redeem your PMGT token for physical gold, if you have a verified GoldPass. This is not available in all countries. You can check the GoldPass website for an up-to-date list of countries where the GoldPass is available. If eligible, PMGT is redeemable for a wide range of gold – from 1oz all the way to 400oz gold bars.

Read the PMGT Whitepaper.

Aurus Gold (AWG)

Aurus Gold (AWG) is a gold-backed cryptocurrency that is built on the Ethereum blockchain. Each AWG token is fully backed by 1 gram of London Bullion Market Association (LBMA) accredited gold, which is held at a number of audited and insured vaults in Zurich, London, Montreal, Istanbul and Singapore.

Unlike many of the other gold-backed cryptos we reviewed, Aurus charges an annual storage fee starting at 0.4% per annum. This fee potentially increases to 2% for non-KYC wallets. However, it also offers investors an option to earn a yield on their gold with their linked DeFi product (AWS). Read more about this here.

Redemption for Physical Gold

AWG can be redeemed for physical gold. Aurus has partnered with a wide network of gold dealers including Direct Bullion.

Exchanges and Liquidity

AWG is available to purchase and trade at CEX.io.

Read the Aurus Gold Whitepaper.