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Cryptocurrencies are purely digital blockchain-based tokens, but they can also be backed by tangible assets.
Gold is a popular choice for this. Gold-backed cryptocurrencies refer to digital coins that are worth a set amount of gold each.
There are dozens of different gold-backed cryptocurrencies in existence, but the vast majority are either outright scams or cannot be verified as actually being gold backed.
The following is a list of gold-backed cryptocurrencies, along with what secures their value.
|Tether Gold (XAUT)||Tether is the worlds largest issuer of stablecoins and now offers a gold backed cryptocurrency as well.|
Each XAUT token corresponds to a single troy fine ounce of gold on a London Good Delivery (LGD) bar – which is roughly 400 ounces per bar. LGD bars are issued by the London Bullion Market Association, while the token itself is offered by TG Commodities Limited. XAUT is an ERC-20 token and can be held in any Ethereum wallet.
|Where to buy XAUT|
|PAX Gold (PAXG)||US-based Paxos, which issues PAXG, is a New York State Trust Company, subject to regulatory oversight by the New York State Department of Financial Services.|
All fiat and crypto customer assets deposited with Paxos, such as those backing PAXG, are backed with mandatory capital reserves.
|Where to buy PAXG|
|Meld Gold (MCAU)||Meld Gold is issued by Australian company Meld and hosted on the Algorand blockchain.|
Meld Gold (MCAU) tokens are backed by one gram of physical gold held in a range of Australian vaults and refineries, including Imperial Vaults, the Australian Bullion Company and Melbourne Mint.
|Where to buy MCAU|
|GoldSilverCoin (AUS and AGS)||Offers gold and silver-backed cryptocurrency.|
Detailed quarterly audit reports, verifying the quality and quantity of the physical gold and silver backing, are available on the website.
You can verify that the number of AUS and AGS tokens in circulation matches the respective gold and silver holdings of GoldSilverCoin.
|Where to buy AUS and AGS|
The best gold-backed cryptocurrency is one that you are certain is genuinely backed by gold and that you can redeem for physical gold when needed.
The exact procedures for validating a coin will vary between projects. For example, sometimes you might take it as a matter of trust that a coin is genuinely backed based on the reputation of its issuer, while other times you might want to do a thorough check via independent auditors.
But generally, to validate the backing of a gold-backed cryptocurrency, you can:
The procedures for redeeming a gold-backed cryptocurrency for physical gold will vary but there are two main options you might encounter.
Gold-backed cryptocurrencies are often regarded as a type of stablecoin, prized for the way they tend to mirror the market price of gold.
However, their ability to mirror gold prices is only as strong as the extent to which they can be redeemed for gold. If it's difficult or expensive to redeem, a gold-backed cryptocurrency might deviate from gold prices.
Plus, gold and gold-backed cryptocurrencies are both still subject to their own separate market forces.
Compared to gold itself, gold-backed cryptocurrencies may be traded on lower liquidity markets, so even if they broadly mirror gold prices, they can still be much more volatile.
For example, the chart below shows the DigixGlobal (DGX) gold-backed cryptocurrency prices in the blue line, compared to gold market prices in the orange line, over an approximately six-month period.
Image sourced on 24 October from DGXUSD chart by TradingView
As you can see, DGX prices broadly mirror gold, but are much more volatile on the whole.
All of the exchanges in the table below offer gold-backed cryptocurrencies, or similar gold-backed products.
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