MVPs in the Tokenised Gold Market

In 2026, the price of gold fluctuates around $5000 per ounce. In this context, tokens backed by physical bullion have gained particular significance among advanced capital market participants. The two key solutions remain Tether Gold (XAUT) and Paxos Gold (PAXG). According to issuer attestations, both assets are 100% backed by physical London Good Delivery gold and stored in secure vaults.

Trading in these tokens can be conducted 24/7 on platforms specialising in digital assets. This infrastructure aims to reduce the liquidity constraints typical of traditional commodity markets outside stock exchange hours. It ensures continuous availability regardless of time zones and standard financial institution working hours. Of course, be mindful of the risks of digital deposits and blockchain settlements.

Both tokens differ in terms of their operational, regulatory and technical structure. XAUT is issued by TG Commodities Limited (affiliated with the Tether group) and operates with gold reserves in Switzerland under the regulatory framework of El Salvador. PAXG is issued by Paxos Trust Company, National Association (Paxos Trust Company, N.A.), a federally chartered trust company operating under U.S. federal oversight by the Office of the Comptroller of the Currency (OCC).

Both assets are reported to rely on LBMA Good Delivery bars, with a purity typically ranging between .995 and .9999 fine gold. The gold backing XAUT is stored in vaults located in Switzerland. In the case of PAXG, the bullion is custodied in Brink's vaults in London. The blockchain networks supported by XAUT are Ethereum and Tron. PAXG operates exclusively on Ethereum. Transparency measures also differ: XAUT provides quarterly assurance reports conducted by BDO Italia; PAXG undergoes third-party attestations on a monthly basis.

In 2026, both projects do not charge ongoing management fees; it is an important feature that distinguishes them from many traditional gold ETFs. On-chain transaction fees also differ. XAUT does not collect any additional fees for transfers beyond standard network gas costs. PAXG currently facilitates on-chain transfers without additional issuer-side fees.

Minting / Burning

For XAUT, there is a fixed fee of 0.25%. For PAXG, the fee is variable and ranges from 0.12 to 1.0% depending on the transaction volume. On major exchange platforms, the spread for XAUT is typically narrower, reflecting higher liquidity and strong integration with USDT pairs. PAXG is more widely used in institutional transactions executed through OTC desks, which is observed to contribute to greater price stability for large orders.

Redemption Mechanism for Physical Gold

The possibility of redeeming tokens for physical gold is the cornerstone of both projects, providing a tangible link to the underlying asset. This process is primarily aimed at institutional investors and individuals with significant capital. The standard minimum exchange threshold set by the issuers typically corresponds to one full London Good Delivery (LGD) bar. This is equivalent to approximately 400 troy ounces (typically between 350 and 430 oz). With the price of gold at around $5000 per ounce, the minimum redemption transaction value starts at approximately $2 million.

In the case of XAUT, token holders may request physical delivery of bullion within Switzerland. Alternatively, the issuer allows for the sale of gold and payment of the equivalent value in US dollars. This process requires successful completion of the issuer's verification procedures, provision of specific address details, and coverage of all transport and insurance costs. The entire process is carried out directly by the issuer or an authorised partner. Noteworthy is that this process is handled directly by the issuer, subject to their specific terms and conditions.

PAXG offers a broader range of redemption options. Holders can exchange tokens for physical LBMA bars, unallocated gold from authorised dealers on the London LBMA market, or directly for USD fiat currency. Paxos Trust Company provides a dedicated transparency online tool called Gold Allocation Lookup. After entering their Ethereum wallet address, users can access the serial number, weight, fineness and date of manufacture of the specific bar assigned to their tokens. This functionality is designed to provide identification and verification of the physical collateral backing the tokens.

It should be emphasised that the physical delivery process involves additional logistical and operational costs beyond the issuer's fees. It also requires compliance with regulatory and customs requirements applicable at the place of delivery. In practice, only a few institutional investors use the physical delivery option. Most settle in cash or through secondary market sales.

2026 Market Situation

RWA Gold Tokens, CoinMarketCap, 25 February 2026

In February 2026, the total market capitalisation of tokenised gold and its volume is dominated by XAUT and PAXG. Some market analyses, including Wintermute reports, have previously highlighted the potential for continued expansion in the RWA (Real World Asset) segment throughout the year. Demand for tokenised forms of gold is driven by global geopolitical uncertainty and the traditional role of the precious metal as a hedge in periods of elevated inflation.

XAUT is widely used in retail, particularly in Asian and emerging markets. Support for the Tron network ensures low costs and very fast transfers. PAXG is more commonly used in the DeFi ecosystem as a form of collateral in lending protocols and among institutional investors in the US market who prioritize its NYDFS regulatory framework.

In 2026, Tether is one of the largest private holders of physical gold, buying more gold than many individual countries. According to reports by Jefferies analysts and its own certifications, the group's total gold reserves exceed 148 tonnes. The scale of these reserves translates into significant depth in the XAUT market, although at the same time it also highlights the concentration risk inherent in relying on a single private issuer for such a large volume of tokenized assets.

Platforms specialising in digital assets enable advanced traders to access both tokens simultaneously within a single trading environment. This allows market participants to compare the liquidity, cost and redemption mechanisms of both solutions in practice.

Tether Gold (XAUT) and Paxos Gold (PAXG) illustrate two different models of physical gold tokenisation. Differences include issuer jurisdiction, audit frequency, fee structure, supported blockchain networks, and the extent of options for exchanging for physical bullion. Sophisticated investors analyse these elements in the context of their own allocation strategies in the hard-backed digital asset segment.