Tokenized Gold Explained — PAXG vs XAUT, Risks & How They Compare to Spot Gold
Gold-backed tokens bring physical gold to the blockchain. Each token represents one troy ounce of real gold stored in professional vaults. Two tokens dominate the market: PAXG (Pax Gold) by Paxos and XAUT (Tether Gold) by TG Commodities/Tether.
What Is Tokenized Gold?
Tokenized gold is a digital asset where each token is backed 1:1 by physical gold held in secure vaults. Unlike gold ETFs, you hold the token directly in your crypto wallet — and in some cases, you can redeem it for physical gold.
1:1
Token to gold ratio
24/7
Trading hours
ERC-20
Token standard
Key concept: Tokenized gold combines the inflation-hedge properties of physical gold with the speed, divisibility, and accessibility of cryptocurrency. You can own 0.001 ounces of gold and transfer it anywhere in seconds.
PAXG — Pax Gold
PAXG is issued by Paxos Trust Company, a New York-regulated financial institution. It's one of the most trusted gold tokens due to its regulatory status.
| Issuer | Paxos Trust Company (New York) |
| Regulator | New York Dept. of Financial Services (NYDFS) |
| Gold Custodian | Brink's vaults in London (LBMA-accredited) |
| Blockchain | Ethereum (ERC-20) |
| Minimum Redemption | 1 PAXG (1 troy ounce) |
| Physical Redemption | Yes — from 430 oz (1 London Good Delivery bar) |
| Audit | Monthly attestation by third-party accounting firm |
| Creation/Redemption Fee | 0.02% (via Paxos) |
Each PAXG token corresponds to a specific gold bar with its own serial number. You can look up your gold's bar number, weight, and purity on the Paxos website using your Ethereum address.
XAUT — Tether Gold
XAUT is issued by TG Commodities Limited, a Tether group entity based in the British Virgin Islands. It's the second-largest gold token by market cap.
| Issuer | TG Commodities Limited (Tether group) |
| Regulator | BVI-registered; no US financial regulator |
| Gold Custodian | Vaults in Switzerland |
| Blockchain | Ethereum (ERC-20) + Tron (TRC-20) |
| Minimum Redemption | 50 XAUT (50 troy ounces) |
| Physical Redemption | Yes — delivery in Switzerland (fees apply) |
| Audit | Quarterly attestation |
| Creation/Redemption Fee | 0.25% (via Tether) |
PAXG vs XAUT Comparison
| Feature | PAXG | XAUT |
|---|---|---|
| Regulatory Oversight | NYDFS (strong) | BVI (limited) |
| Vault Location | London (Brink's) | Switzerland |
| Blockchain | Ethereum only | Ethereum + Tron |
| Min. Redemption | 1 oz | 50 oz |
| Create/Redeem Fee | 0.02% | 0.25% |
| On-Chain Transfer Fee | None (gas only) | None (gas only) |
| Audit Frequency | Monthly | Quarterly |
| Bar Serialization | Yes (per token) | Yes (per token) |
| Market Cap | ~$600M | ~$700M |
| Main Exchanges | Binance, Kraken, Coinbase | Binance, Bitfinex |
Premium vs Spot Gold
Gold tokens rarely trade at exactly the spot gold price. The difference is called the premium (above spot) or discount (below spot). This gap fluctuates based on demand, liquidity, and market sentiment.
Spot Gold (XAU)
$4,545.20
PAXG
$4,538.85
0.14% vs spotXAUT
$4,528.47
0.37% vs spotWhy the gap? Token prices reflect real-time crypto market demand, while spot gold follows the OTC London market. During crypto bull runs, tokens may trade at a premium. During sell-offs or low liquidity, they may trade at a discount. Track the premium live on our PAXG price page and XAUT price page.
Advantages of Gold Tokens
24/7 Trading
Trade gold any time — weekends, holidays, 3 AM. No exchange hours to worry about.
Fractional Ownership
Own as little as 0.001 ounces. No need to buy an entire bar or coin.
No Storage Costs
The issuer handles vault storage and insurance. You just hold the token.
Instant Settlement
Transfer gold to anyone with a crypto wallet in minutes, not days.
Global Access
Buy from anywhere with an internet connection. No bank account needed on some platforms.
On-Chain Transparency
Token supply and reserves are verifiable on the blockchain and through audits.
DeFi Composability
Use gold tokens as collateral in DeFi protocols, earn yield, or add to liquidity pools.
Risks and Downsides
Counterparty Risk
You trust the issuer (Paxos or Tether) to actually hold the gold. If the company fails, your claim depends on the legal structure and jurisdiction.
Regulatory Risk
Regulations around crypto-assets are evolving rapidly. A token legal today could face restrictions tomorrow. PAXG has an edge here with NYDFS oversight.
Smart Contract Risk
Bugs in the token contract could lead to loss of funds. Both PAXG and XAUT have been audited, but no code is risk-free.
Custodial Centralization
Despite being 'on-chain,' the underlying gold sits in a centralized vault. The issuer can freeze or blacklist tokens.
Redemption Friction
Converting tokens back to physical gold involves minimum amounts (1 oz for PAXG, 50 oz for XAUT), fees, and paperwork.
Premium/Discount Volatility
The token price can deviate from spot gold, meaning you might buy at a premium and sell at a discount — a hidden cost.
Gas Fees
Ethereum transactions cost gas fees, which can be significant for small trades during network congestion.
Important: Gold tokens are not the same as owning physical gold in your possession. If the issuer becomes insolvent, your tokens may not be fully recoverable, depending on the bankruptcy jurisdiction and how reserves are structured.
Gold Tokens vs Gold ETFs
| Feature | Gold Tokens | Gold ETFs (GLD, IAU) |
|---|---|---|
| Trading Hours | 24/7/365 | Stock exchange hours only |
| Minimum Buy | Fractional (~$10) | 1 share (~$180 for GLD) |
| Physical Redemption | Yes (PAXG, XAUT) | No (authorized participants only) |
| Expense Ratio | 0% ongoing | 0.25–0.40% per year |
| Custody | Self-custody (wallet) | Brokerage account |
| Regulation | Varies by issuer | SEC-regulated (US) |
| Tax Treatment | Crypto (varies) | Collectibles (28% in US) |
| DeFi Integration | Yes (collateral, yield) | No |
| Counterparty Risk | Issuer + smart contract | Fund sponsor + custodian |
Who Should Buy Gold Tokens?
Gold tokens make the most sense if you:
- Already use crypto and want gold exposure without leaving the ecosystem
- Want to use gold as DeFi collateral or in liquidity pools
- Need to transfer gold internationally quickly and cheaply
- Want fractional gold ownership starting from very small amounts
- Live in a region with limited access to traditional gold markets or ETFs
Gold tokens are probably not for you if you:
- Prefer holding physical gold you can touch
- Want the strongest possible regulatory protection (go with ETFs)
- Are not comfortable managing crypto wallets and private keys
- Need tax simplicity (token tax treatment is still evolving)
How to Buy PAXG and XAUT
Buy PAXG
- Create an account on Binance, Kraken, or Coinbase
- Deposit USD, EUR, or crypto
- Search for PAXG/USD or PAXG/USDT
- Place a market or limit order
- Optionally withdraw to your own Ethereum wallet
Buy XAUT
- Create an account on Binance or Bitfinex
- Deposit USD, EUR, or crypto
- Search for XAUT/USD or XAUT/USDT
- Place a market or limit order
- Optionally withdraw to Ethereum or Tron wallet
Track the price: Monitor live PAXG and XAUT prices with their premium vs spot gold on our PAXG price page and XAUT price page. Compare them against the live gold spot price to find the best entry point.
Whether you choose PAXG, XAUT, or stick with traditional gold investments depends on your comfort with crypto technology, your need for regulatory protection, and how you plan to use your gold. For most investors, gold tokens work best as a complement to a broader portfolio — not a replacement for physical gold or ETFs. Learn more in our guides on how to buy gold and what drives gold prices.