Is The Tether Gold Standard Token an Inflation Beater?

Tether, the world’s largest stablecoin issuer, is pushing a way to store value and beat fiat inflation with a gold-backed stablecoin called XAUT. The stablecoin offering from the company is a digital token backed by physical gold.

On July 6, Tether’s chief technology officer, Paolo Ardoino, proposed a new way to beat inflation and fiat devaluation. However, XAUT is not a new crypto asset and was launched in 2020.  

Tether Gold Stablecoin

Ardoino pointed out that gold can’t be inflated, which is why central banks stopped “pegging their printing power” to their gold reserves.

“Gold has been the companion of humanity for the last many thousands of years, used both as a store of wealth and a mean of exchange.”

Furthermore, it has two similarities with Bitcoin, he added. Both are hard to extract through mining and proof-of-work, and both have a limited supply.

However, Ardoino said that Tether Gold (XAUT) is not competing with Bitcoin but with fiat money.

“For many communities around the world, XAUT could be an easier first step towards relinquishing FIAT money and move into the new digital paradigm.”

Many countries around the world are still suffering punishing levels of inflation. Venezuela, Lebanon, Zimbabwe, Sudan, Syria, and Argentina all still have triple-figure inflation. In the US, inflation is 4% after falling from over 9% in June 2022.

The gold stablecoin is 100% backed by physical gold, which is held in Switzerland and physically redeemable, he noted. Additionally, 1 XAUT token is equal to an ounce of gold which is currently worth $1,913.

According to the Tether website, XAUT has a market capitalization of $470 million. It has 7,643 kilos of gold backing it, equivalent to 611 gold bars.

It also stated that there are no custody fees. “Just a one-time 25 basis point fee at the time you purchase or redeem an XAUT from TG Commodities Limited,” it noted.

AU vs. BTC

Tether Gold does not have a great deal of liquidity, however. According to CoinGecko data, its 24-hour trading volume is just $6.5 million. This is dwarfed by USDT, which has almost $30 billion in daily trade volume.

Bitcoin has vastly outperformed gold so far this year. Since Jan. 1, BTC prices have gained 83%, whereas gold prices have only managed 4.6% over the same period.

Furthermore, gold has been down trending since its high of over $2,000/oz in early May. BTC has gained over the same period, so the correlation between the two has not been evident this year.