Gold-backed stablecoins such as Paxos Gold (PAXG) and Tether Gold (XAUT) are in high demand amidst the ongoing economic crisis. For example, Paxos Gold has more than doubled since Monday.
According to a report from CoinDesk, demand is growing not only for physical gold but also for digital currencies tied to gold.
This is mainly because, due to the increasing demand for physical gold, traditional suppliers are facing its shortage in marketing. That is why investors’ eyes turn to the two most liquid token projects that are tied to gold – Paxos Gold and Tether Gold.
Both of these tokens are supported by one ounce of gold stored in the institutional vault. Investors have the right to redeem physical gold in exchange for a blockchain-based token.
Roy Sebag, founder of the Goldmoney depository, explained the increased demand for gold:
The Fed completely changed the rules – the real rate of interest swung even more and so we are seeing all that money flow into gold immediately.
According to Paxos Gold spokesman Rebecca McClain, purchases of new PAXGs, which represent one ounce of gold from the London Market Bullion Association (LBMA), have more than doubled since the beginning of the week. The spokesperson also confirmed that the platform has enough physical gold to cover current volumes.
Demand for Tether Gold also increased rapidly. According to Nomics data provider, the market ceiling of this stablecoin increased to $ 50 million on 25 March 2020.
According to The Block newspaper on March 25, problems with the supply chain in obtaining physical gold alone could prevent further issuing of tokens. In its statement, Tether Gold refused to comment on the daily market movements and stated in its comments:
We have seen strong growth for XAUT and we anticipate XAUT will continue to grow as it establishes itself as the dominant digital token representing gold ownership.
Paxos Gold CEO Walter Hessert said the market has seen unprecedented volatility in the markets over the past few weeks, so people naturally sought some safe haven, like gold. Walter Hessert added:
AS A BLOCKCHAIN-BASED TOKEN ALSO OFFERS HIGHEST LEVELS OF CONTROL AND AVAILABILITY OUTSIDE THE FINANCIAL SYSTEM.
Paxos Gold spokesman Rebecca McClain said that increased demand for PAXG would not reduce supply:
WE ARE ONLY CONCERNED WITH LBM GOLD LBMA AND THERE IS A LOT OF METAL. THE ADVANTAGE IS THAT IT IS A TRUSTED AND REGULATED PLAYER. WE CAN GET ACCESS TO THIS MARKET DIFFERENT FROM ANYONE OTHER.