While the stock and cryptocurrency markets have declined over the past week, the price of the precious metal gold has gained 3.85% during the past seven days. One ounce of fine gold rose from $1,826.92 on February 10 to $1,897.36 an ounce on February 19. Additionally, the top gold-backed crypto coins today saw a significant increase in demand along with a premium above the spot market price of gold.
Gold shining during economic uncertainty
The world economy has collapsed and many are blaming the turmoil between Russia and Ukraine and the prospect of war. This led to a fall in the stock markets last week and the top three indices remained in the red mark till the closing bell on Friday. The Nasdaq closed at -168, the Dow Jones closed at -232, and the NYSE was also down -99 at the end of the day on Friday. Furthermore, the cryptocurrency markets followed suit as billions of dollars left the crypto economy as it fell below the $2 trillion threshold to $1.88 trillion last week.
Today, the crypto economy has lost 3.1% in USD value over the past 24 hours and Bitcoin (BTC) has fallen below the $40K price area. Unlike equities and cryptocurrencies, the precious metal gold has fared well this week, with the USD gaining 3.85% in value over the past seven days. At the time of writing, a troy ounce of $.999 is trading just below $1,900 at $1,897.36 an ounce. The value of one ounce of .999 fine silver has also increased since January 28. That day, an ounce of silver was trading at $22.47 an ounce, and today it’s changing hands for $23.94.
See the surge in tokenized gold market caps, premium on specific gold token spots
While the precious metals have seen the markets move northwards in value, there has been an increase in demand for tokenized gold crypto coins. Among Tether Gold (XAUT), Pax Gold (PAXG), Perth Mint Gold Token (PMGT), and Digix Gold (DGX), all four tokens of gold coin market cap have gained between 2.4% and 8% in value over the past week. XAUT and PAXG are the two largest gold-backed crypto coins in terms of market valuation. XAUT has a total market capitalization of $430 million and a valuation of PAXG at $424 million.
Meanwhile, all of them are fluctuating between the spot market price of gold and a decent premium. For example, at the time of writing, Pax Gold (PAXG) is changing hands for $1,917.09 per coin which is 1.039% higher than the spot market price. The Perth Mint Gold Token (PMGT) is also trading at prices higher than the spot market price of an ounce of physical gold. Currently, the PMGT premium is up 0.915% from the current $1,897.36 per ounce recorded on February 19.
25 days ago bitcoin.com news reported massive gains for Tether Gold (XAUT) and Pax Gold (PAXG) and the valuations have grown since then. As of January 25, XAUT had a market cap of $410 million and has added over $20 million in value. PAXG had a market cap of $332.7 million and has added $92 million in USD value over the past 25 days. The market valuation of XAUT has increased by close to 20,000% in two years while PAXG has seen a growth of 16,000% during that time frame.
Similar to stablecoins, participants in the crypto economy have found value in gold-backed digital currencies and this trend appears to be a mainstay in the industry. Like their physical counterparts, digital gold tokens can help one hedge against market downturns. With the current premium, there may also be arbitrage opportunities, just as they do in the fiat-pegged stablecoin markets.
What do you think about the development of gold-backed tokens like XAUT, PAXG, PMGT and DGX? What do you think about these tokens given the premium on the market? Let us know what you think about this topic in the comment section below.
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