TLDR
- Gold-backed cryptocurrencies PAXG and XAUT have risen over 23% year-to-date, outperforming the wider crypto market
- Gold ETF inflows reached a three-year high in Q1 2025, with 226.5 tonnes flowing in
- Gold-backed cryptocurrencies saw net token minting of over $42.7 million in Q1
- Bitcoin has lost more than 11% of its value this year, while the broader crypto market has fallen by 30%
- Jeffrey Gundlach predicts gold could reach $4,000, driven by central banks increasing their gold reserves
Gold-backed cryptocurrencies are having a moment in 2025, with tokens like Paxos Gold (PAXG) and Tether Gold (XAUT) rising more than 23% year-to-date to reach new all-time highs above $3,300. This performance stands in stark contrast to the broader cryptocurrency market, which has struggled throughout the year.
The impressive growth of these tokens mirrors the rally in physical gold markets, where the precious metal recently breached the $3,000 mark for the first time. Both PAXG and XAUT are designed to track the price of gold, with each token backed by physical gold reserves.
While gold-backed cryptocurrencies have flourished, Bitcoin (BTC) has lost more than 11% of its value so far this year. The wider crypto market has fared even worse, falling by approximately 30% based on the CoinDesk 20 (CD20) index.
ETF Inflows Signal Growing Investor Interest
The first quarter of 2025 saw gold ETF inflows reach 226.5 tonnes, marking the highest level since early 2022, according to data from the World Gold Council. Nearly 60% of this demand came from North America, highlighting strong regional interest in gold as an investment.
This trend has extended to the crypto sector, with gold-backed cryptocurrencies seeing net token minting of over $42.7 million in Q1 2025. This activity, combined with gold’s price appreciation, has pushed the total market capitalization of gold-backed tokens to nearly $1.4 billion.
Last week, gold ETFs surpassed Bitcoin ETFs in total assets under management. This milestone underscores the shifting investor sentiment toward precious metals as a store of value.
The surge in gold prices comes amid escalating U.S.-China trade tensions, which have prompted investors to seek refuge in traditional safe-haven assets. The precious metal’s performance during this period reinforces its historical role as a hedge during times of economic uncertainty.
Bullish Predictions from Market Experts
Jeffrey Gundlach, CEO of DoubleLine Capital and known as the ‘Bond King,’ believes gold’s rally is far from over. During a macroeconomic outlook presentation titled ‘Not in My Neighborhood,’ Gundlach predicted that gold could climb as high as $4,000 in the future.
“I think gold will make it to $4,000. I’m not sure that’ll happen this year, but I feel like that’s the measured move anticipated by the long consolidation at around $1,800 on gold,” Gundlach stated.
His bullish outlook is supported by changing strategies among global central banks. These institutions have been increasingly adding to their gold reserves, reversing a previous trend of shrinking holdings.
According to IMF data presented by Gundlach, the total amount of gold held globally has climbed from around 34 billion Special Drawing Rights (SDR) in 2010 to 40.9 billion SDR today. This level matches what was last seen between 1975 and 1980.
Special Drawing Rights, created by the IMF in 1969, are an international reserve asset defined through a basket of currencies. The increase in SDR-denominated gold holdings points to renewed interest in gold as a reserve asset among central banks worldwide.
The tokens PAXG and XAUT offer crypto investors exposure to real-world assets with blockchain-based liquidity. This combination of traditional value and digital flexibility has proven attractive during the current market conditions.
Current prices for PAXG and XAUT have receded slightly from their peaks, trading at $3,265 and $3,244 respectively. However, they continue to outperform most other digital assets in the cryptocurrency space.
The contrast between gold-backed cryptocurrencies and the rest of the digital asset market highlights what many analysts describe as a flight to safety among investors. As market volatility continues, this trend may persist throughout 2025.
