The news has been circulating for some time, though the official announcement came only today: Tether Gold (XAUT), a digital asset anchored to physical gold (XAU), has been launched.
The token is both an ERC20 on the Ethereum blockchain, and a TRC20 on the TRON blockchain, allowing it to be transferred to and from any Ethereum or TRON address using P2P technology.
Each XAUT token represents the ownership of an ounce of physical gold on a specific gold bar, thus a 1:1 ratio with an ounce of gold.
It has been issued to meet the growing demand for digital exposure to the safe-haven asset par excellence by TG Commodities Limited, which will sell and redeem the XAUT tokens.
This allows investors to buy a stablecoin that replicates the price of physical gold without any fee for the custody of gold.
In addition to XAUT, Tether has already issued other stablecoins in the past, anchored to the value of the US dollar (USDT), the euro (EURT) and the Chinese offshore yuan (CNHT).
Tether (USDT) has been the first stablecoin created in October 2014 and has been the only existing stablecoin for a long time.
The CTO of Tether and Bitfinex, Paolo Ardoino, said:
“There is growing demand for digital exposure to physical gold, making the launch of Tether Gold a timely innovation in the crypto ecosystem. Tether Gold provides the combined benefits of both physical and digital assets, removing the drawbacks of holding gold in more traditional ways, such as high storage costs and restricted access”.
Why an asset anchored to gold?
The crypto world’s interest in gold seems to be increasing and, in fact, Tether Gold is not the first project of its kind in circulation. Lately, the correlation between the bitcoin price and that of gold seems to be getting ever stronger, so the market demand for stablecoins anchored to gold seems to be growing.
At this moment in history, uncertainties and fears in the financial markets, such as those arising from the ongoing contrasts between the US and Iran, are pushing many investors towards traditional safe haven assets, such as gold, or towards new assets considered as refuge assets, such as bitcoin.
The correlation between gold and bitcoin is therefore not at all accidental and is a consequence of the fears emerging among investors.
For example, the price of an ounce of physical gold during these first weeks of 2020 rose from around $1,517 to $1,545, peaking at over 1,600 on January 8th. For its part, bitcoin has gone from about $7,200 to $8,500, with a pattern that for several days seemed similar.
At this point, it is fair to imagine that crypto investors may also be interested in investing in physical gold, and stablecoins anchored to its value are the response to this market demand.
Finally, the fact that such a stablecoin is offered by Tether, the company behind the world’s most prominent and used stablecoin in the world, USDT, could very well give Tether Gold a huge exposure, both because the market demand for such an asset seems to be growing, and because Tether is already widely spread on many exchanges.
The combination between a stablecoin anchored to the value of physical gold and a well-known brand in the crypto sector such as Tether might turn out to be a trump card which could allow this token to become widespread in a very short time.