KEYTAKEAWAYS
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Gold has surged past $3,500 per ounce, supported by ETF inflows, central bank buying, and rising geopolitical risks, shifting its role from tactical hedge to strategic allocation.
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The World Gold Council’s planned “digital gold” (PGIs) could reshape London’s $900B OTC market, turning physical bullion into standardized digital collateral.
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Tokenized gold projects like XAUT, PAXG, and XAUm show different paths—from retail adoption to regulated institutional products—highlighting gold’s evolving role in DeFi, payments, and cross-border settlement.
CONTENT
GOLD PRICE SURGE: FROM TACTICAL HEDGE TO STRATEGIC ALLOCATION
When the gold price was refreshed again on a September morning, people realized this was not just another rally of precious metals, but a line rewriting the global financial order. On September 2, spot gold surged above $3,500 per ounce, and in the early morning of September 3 it climbed again, reaching the $3,530–$3,540 range and continuing its historic highs. The driving forces were not mysterious: bets on rate cuts, concerns over central bank independence, defensive moves against geopolitical risks, and doubts about the sustainability of U.S. debt.
These currents overlapped into a powerful flow of capital. The non-yielding nature of gold was “revalued” in the window where rates had peaked and could decline, while funds from North America and Asia via ETFs provided direct buying depth. In the first half of 2025, physical gold ETFs recorded the strongest half-year net inflow since 2020, about 397 tons (around $38 billion), pushing holdings to a two-year high of 3,616 tons. This moved the demand curve for “financialized gold” upward. With markets awaiting September’s Fed meeting and labor data, concerns about short-term rate paths and sticky inflation continued to push safe-haven demand to the forefront. For a rare moment of consensus, from hedge funds to family offices, from central bank reserves to retail ETFs, gold once again became a “must-have” in portfolios, not just a tactical hedge.
WGC’S “DIGITAL GOLD”: THE THIRD PATH FOR THE LONDON MARKET
What deserves more attention than the steep price curve is the shift in market structure. The World Gold Council (WGC) in September unveiled its “digital gold” plan — Pooled Gold Interests (PGIs) — essentially laying a standardized digital layer over London’s $900 billion-a-year gold market. This “layer” aims to merge two existing models: the safety and clear ownership of allocated gold, and the low-cost, high-liquidity features of unallocated gold. Under a trust and fractional ownership structure, gold bars can be split into digital units that transfer quickly on-chain and can be reused as collateral. According to WGC, PGIs will begin pilot trials in London in Q1 2026, targeting banks, dealers, and institutional investors.
The ambition is not to let retail buyers “hold a coin on-chain,” but to rewrite the logic of settlement and collateral in the gold market — turning static wealth storage into circulating collateral. What does this mean? It means gold could appear more frequently in repo, margin management, and cross-institutional clearing. It means a new round of tension between shadow credit and transparency.
It also means convenience yield and term structure could be repriced in a digital way. Some cheer the added liquidity and standardization, while others question whether London’s conservative OTC system has the motivation to embrace change. But one thing is clear: WGC’s move is a reflexive response to crypto-native finance. If young on-chain markets can turn the dollar into a frictionless settlement asset, then gold also needs a digital ID that modern financial infrastructure can recognize.
THE TOKENIZED GOLD LANDSCAPE: FROM XAUT TO XAUM ACROSS THE GLOBE
Zooming into tokenized gold, the picture becomes richer and more complex. In this sector, XAUT and PAXG form a “duopoly” of scale and compliance. XAUT leverages Tether’s global distribution power, with its latest audit showing more than 7.66 tons of physical gold backing, and has minted large amounts on Ethereum to meet demand.
Its redemption rules and jurisdiction make it more like “digital gold for retail and exchange ecosystems,” with liquidity across chains and exchanges, but transparency concerns remain for institutions. PAXG, by contrast, has the regulatory moat of NYDFS, LBMA vault custody, and monthly audits, making it the preferred choice for compliance-focused funds. Each token corresponds to a 1-ounce LBMA gold bar with a serial number, providing a “verifiable ownership experience” that earns it higher acceptance in exchanges and DeFi lending discussions.
In Asia, Matrixdock’s XAUm emphasizes “compliance + audit + regional vaults,” launched on MAS-licensed InvestaX, with semi-annual audits by Bureau Veritas down to specific bar numbers and vaults. Its hybrid design — ERC-20 for fractional trading, convertible to ERC-721 when reaching full-bar thresholds — tries to bridge small trading and whole-bar redemption. KAU and VRO, meanwhile, show more localized use cases: KAU, pegged to 1 gram, explores “spending gold as money” with payment cards and merchant networks, fitting into emerging markets and cross-border transfer; VRO, rooted in European bullion traditions, focuses on 1 gram denominations and redemption, serving as a niche savings hedge for regional users.
Taken together, the map is clear: XAUT/PAXG dominate global liquidity and compliance, XAUm represents regulated, institution-friendly growth in Asia, while KAU/VRO serve long-tail needs of payments and small savings. Total tokenized gold market cap remains far below gold ETFs, but its functional scope — collateral, clearing, cross-border transfer — is steadily expanding.
RISKS AND THE FUTURE: GOLD AS A BRIDGE BETWEEN TRADITIONAL AND CRYPTO
The real question is: once digitized, will gold resemble a “dollar stablecoin” or an “on-chain bond”? The answer may be something in between. If PGIs succeed, gold will enter repo and collateral networks as standardized digital units, enhancing liquidity in money markets. Tokenized gold for the public, meanwhile, will balance “verifiable value storage” with “programmable liquidity tools.”
Over the next 6–12 months, three threads are worth following: first, the sustainability of financialized demand — ETF inflows, central bank purchases, and U.S. real rates. As long as these variables hold, gold’s bullish structure remains intact. Second, the institutionalization of digital gold — who joins the London pilot, how LBMA and custodians align tech and compliance, and whether major brokers or clearinghouses add PGIs to collateral baskets.
Once infrastructure connects, gold truly becomes a yield-bearing financial asset. Third, the usability of on-chain gold — whether XAUT/PAXG gain collateral status in DeFi, XAUm’s institutional adoption and multichain reach in Asia, and KAU’s penetration in payment networks. If gold tokens can close the loop between cross-border settlement, collateral financing, and retail storage, their complement (or competition) with dollar stablecoins will deepen. But tokenization does not erase risks: custody transparency, redemption feasibility, regulatory consistency, and smart contract or bridge security all determine whether the “risk premium of digital gold” is acceptable.
For readers, the most practical step now is to understand these structural differences and define their use case: as a “dollar substitute” for hedging, as a “base layer” for portfolio stability, or as a “regulated vehicle” for cross-border settlement and financing. As gold walks a new path, its story is no longer just about “silent storage of value,” but about “building bridges between tradition and crypto.” It may not be as loud as hype narratives, but as infrastructure, it could reshape how we see safety and liquidity on-chain.
