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Inflation Is Boosting Interest in Gold Tokens

15 Jun, 2021 Martin Petkov
gold token

The Bitcoin rally of 2020 was caused by institutional investors who expected the U.S. dollar to lose value. The cryptocurrency is still seeing a 300% profit year-over-year, but its recent setback has pushed some investors’ interest towards tokens pegged to gold.

Despite the optimism of U.S. Federal Reserve Chairman Jerome Powell, inflation continues to grow above market expectations, hitting 5% year-over-year in May.

Inflation in the United States, % (year)
Inflation in the United States, % (year)

Prices are rising on everything, including food, construction materials and real estate. Meanwhile, some industries are experiencing a labour shortage, which is causing wages to grow. That, in turn, is further accelerating inflation because workers are earning more and thus spending more on services and products.

Wage dynamics in the United States, % (y/y)
Wage dynamics in the United States, % (y/y)

A number of investors are scared of Bitcoin’s volatility, preferring tokenised gold instead. Gold tokens are issued in the ERC-20 standard, which gives them protection and a high degree of cryptographic protection. Until recently, the token issued by Tether was in the leading position before institutional demand pushed PAX Gold to first place.

Image source: StormGain

PAX Gold was issued in September 2019 by Paxos, a company licensed by the New York Department of Financial Services. According to data compiled by Arcane Research, the token’s capitalisation sits at over $263.3 million.. Every purchased token is backed by physical gold and is held separately from the company’s assets.

Image source: coindesk.com


Investors are looking for ways to protect themselves against inflation. One traditional way of doing so is by investing in gold, which has more liquidity and smaller commissions compared to an unallocated metal account (UMA). Inflation growth will cause another rally in the precious metals market, and the 3,000% growth gold tokens have seen over a year and a half confirms the interest in this asset class.

Analytical group StormGain

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