What Are Gold-Backed Stablecoins?

The crypto market is undoubtedly volatile and unpredictable. The price of an asset can soar or plummet in the space of days, or even hours, which makes investing risky.

Enter stablecoins. These cryptos are backed by various other assets, such as fiat currency, silver, and even gold. So, which cryptocurrencies have gold as their backing, and is it even a good thing?

The Perks of Gold-Backed Currency

Many years ago, the United States backed each dollar with gold. This was known as the Gold Standard but only lasted a few decades before the Great Depression of 1929. The UK also used the Gold Standard for some time but abandoned it in 1931.

Today, no government backs up its national currency with gold, but supporting a currency with a precious resource isn’t a bad idea at all. This is because a currency without any kind of supply limit becomes exposed to inflation, the process by which money loses purchasing power. Limiting the supply of a currency with a finite supply of gold makes it easier to hedge against inflation.

Regarding cryptocurrency, there’s another perk of using gold as collateral. Cryptocurrencies are, by nature, volatile. The drastic price fluctuations of cryptos make them a considerable investment risk.

Someone may buy one Ether for $2,000 one day, only to find its value fallen to half of that a few weeks later. People have lost millions through crypto investments that have gone south, so there needs to be a more stable kind of crypto.

This is where stablecoins come into play. Not all stablecoins are the same. There are various kinds of crypto stablecoins with different pegs and collateral, but today we’ll talk about gold-backed stablecoins.

While many stablecoins are pegged to fiat currencies, it’s important to note that most fiat currencies have no backing themselves. So, if the value of a fiat currency changes drastically, the price of all pegged stablecoins will follow.

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But this isn’t the case across the board. Some cryptocurrencies are backed by gold, a universally precious metal. This can provide stability to them and ensure that they never lose all their value (as was the case with the stablecoin TerraUSD). Gold has been used as a tradable asset since around 700 BC and still holds value today.

Of course, the price of gold isn’t constant. It is constantly fluctuating, though it has generally risen over time. According to Macrotrends, an ounce of gold cost around $347 in 1925. Today, an ounce is worth about $1,600. Though the price has risen over the past century, it has experienced a fair number of peaks and troughs as the economy changes and demand shifts. But regardless of this, it has maintained value.

Being backed by gold means that a stablecoin can maintain value over time, which is excellent news for investors. Now, let’s get into which cryptos are backed by gold.

Which Cryptos Are Backed by Gold?

If you’re looking to acquire a gold-backed stablecoin, these are the options you can choose from.

1. Tether Gold (xAUt)

tether coin among regular coins

You may have heard of Tether before. Tether Limited Inc., the company that made Tether Gold, also made Tether (USDT), a hugely popular stablecoin pegged to the US dollar. Tether and Tether Gold were both created in 2014 as ERC-20 tokens, with the latter being totally backed by gold.

When you buy Tether Gold, you become a gold owner. In essence, Tether Gold offers you the ability to own gold without being burdened by the physical aspect of it. Tether will always securely store your gold for you, and you have the right to your physical gold at all times and can exchange your xAUt tokens at any time for real gold. What’s more, Tether Gold doesn’t charge any custody fees.

2. Paxos Gold (PAXG)

paxos gold webpage screenshot

Paxos Gold is another ERC-20 stablecoin backed by physical gold. Each PAXG token is backed by one ounce of a London Good Delivery gold bar, which you will then own upon purchase. Like Tether Gold, you can exchange your PAXG tokens for physical gold or fiat currency if that’s your preference. You also won’t have to incur any custody fees.

The Paxos Trust Company securely holds your gold in London-based bouillon vaults owned by Brink, a company specializing in transporting and storing gold.

3. GoldCoin (GLC)

stack of gold coins

Launched in 2013, GoldCoin allows users to own gold digitally via its ERC-20 tokens, GLC. In fact, GoldCoin is the first fractionalized gold-backed token. This means you don’t have to buy an entire GLC token if you want to invest. Instead, you can buy a fraction of one token, making GoldCoin a very affordable option compared to other gold-backed stablecoins.

Each GLC token is worth 1/1000th of an ounce of 99.9% pure gold. So, you can buy one thousand GLC to get yourself a full ounce or start smaller. You can also redeem your GLC tokens for physical gold at any time. GoldCoin also focuses on privacy, so you don’t need to verify your identity to buy it.

4. Perth Mint Gold Token (PMGT)

trovio perth mint gold token homepage screenshot

Perth Mint Gold Token is a gold-backed stablecoin issued by Trovio, a company specializing in digital assets and blockchain solutions. As the name suggests, Perth Mint Gold Token is an Australian-based asset backed by government-guaranteed gold. Launched in 2018, this token allows you to own physical gold in a digital setting.

The gold that backs Perth Mint Gold Token is securely held in The Perth Mint’s vaults. One PMGT is worth one fine troy ounce of gold, which you can redeem when you desire, which can either be picked up or delivered to you. You also won’t incur any transaction or custody fees using PMGT.

5. Meld Gold (MCAU)

meld website homepage screenshot

The last gold-backed stablecoin on our list is Meld Gold. This crypto company has partnered with Algorand, the creator of the Algorand blockchain and ALGO coin. Meld Gold isn’t as popular as the other stablecoins listed here, but it could still be a solid option for you.

Like many other gold-backed cryptos, you can exchange Meld Gold for physical gold at any time, as well as fiat currency. You can store MELD tokens in the Algorand Wallet, and the Algorand blockchain supports ALGO to MCAU atomic swaps.

Gold-Backed Stablecoins Offer Stability and True Ownership

Using gold-backed stablecoins, an individual can hedge against inflation and rest easy knowing they truly own physical gold. While many stablecoin prices are pegged to riskier assets, gold-backed stablecoins rely on the timeless value of one of the world’s most precious metals.

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