Interest in Gold-Backed Token Trading Grows Amid Supply Disruptions

As gold refiners work to ease acute supply shortages created by market shocks from the coronavirus crisis, trading interest in gold-back digital tokens seems to be growing.

At the end of Q1 2020, gold markets faced a “historic squeeze.” Demand for the yellow metal grew acutely due to economic uncertainty while trading routes and refineries were cut off and shut down.

To ease the shortages, Australia’s largest gold refinery has significantly increased production. It has even been flying gold bars to New York because retail demand for gold is reportedly stronger with Western buyers. In Switzerland, three of the world’s largest gold refineries are partially re-opening after strict lockdown measures forced them to close.

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For digital assets markets, the situation has coincided with a growing interest in trading gold-backed tokens.

Tether Gold, the leading gold-back token measured by volume, launched in late January 2020. During Q1 2020, hourly trading volume for its new token bounced between a few hundred dollars and over $1 million.

On Thursday, hourly trading volume in Tether Gold climbed to over $13 million, up from roughly $1 million the day before, according to CoinGecko.

Tether CTO Paolo Ardoino told CoinDesk there is significant interest from hedge funds and professional traders in using Tether Gold to diversify their portfolio with gold, calling the yellow metal an asset that is “considered in a growth trajectory for the next period.”

The token’s hourly trading volume fell to around $2 million on Friday. Hourly trading volume for Paxos Gold, another gold-backed token, has stayed stable since January at around $1.5 million, according to CoinGecko.

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“Inventory gets bought really quickly after each delivery of gold bars into the vault,” Tether's Ardoino said. Tether stores its gold in Switzerland, and within the last few weeks, as lockdown measures have partially lifted, “more than 50 gold bars have been delivered and sold through Tether Gold,” he said.