A Beginner's Guide to Tether Gold (XAUt)
Since ancient times, gold has been used as a sound store of value. However, physical gold today has numerous drawbacks for investors.
For example, physical bars are heavy and expensive to move. Then there is the question of custody: should you store gold in your home and risk theft or should you trust a custodian firm to store your bullion in exchange for hefty fees? Alternatively, investing in a gold exchange-traded fund (ETF) like the iShares Gold Trust (NYSEMKT:IAU) makes it easy to gain exposure to the precious metal, yet charges you 0.25% in annual management fees.
This is where Tether Gold (XAUt) comes into play to solve these issues with tokenised gold, offering an accessible, blockchain-powered, efficient, and secure alternative to physical gold and gold ETFs.
In what follows, we will explore Tether Gold, what it is, how it works, how you can redeem it, what it is backed by, and how you can buy it.
What Is Tether Gold (XAUt)?
Tether Gold (XAUt) is a gold-backed token issued by Tether. Based in the British Virgin Islands, Tether is a blockchain firm mostly known for issuing the Tether USD (USDT) fiat-pegged stablecoin, which has the largest market capitalisation among all stablecoins.
Launched in 2020 by TG Commodities Limited, a subsidiary of the USDT issuer Tether Limited, XAUt is a stablecoin backed by physical gold bars. Despite following the price of one fine troy ounce of gold, its volatility is minimal compared to cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). Thus, it is considered both a stablecoin and tokenised gold.
What Is Tether Gold Backed by?
Tether Gold is backed by physical gold. All the bars held in Tether's reserves can be tracked on the company's website, allowing XAUt holders to verify their gold allocation in the issuer's vaults.
According to Tether's website, XAUt provides ownership on a 1:1 basis of one fine troy ounce of gold on a physical bar of gold that meets the Good Delivery standard of the London Bullion Market Association (LBMA). In fact, holders can even redeem their tokens for physical gold or cash.
How Does Tether Gold Work?
As a tokenised gold stablecoin, Tether Gold follows the value of one fine troy ounce of gold. This peg is established through the issuer's physical gold reserves.
In practice, this means there should be as much fine troy ounce of gold in Tether's vaults as the circulating supply of the token. Currently, over 246,000 XAUt is in circulation and in public hands in the digital asset market.
Tether Gold resides on the Ethereum blockchain in the form of an ERC-20 token. While this is the only network where you can access the token natively, XAUt can also be moved from Ethereum to other chains through bridges.
Like most digital assets, XAUt can be fractionated up to six decimal places. The smallest unit of the token represents 0.000001 fine troy ounce, which is worth $0.00265 at the current Tether Gold price of $2,650. This - in addition to the gold-backed asset's global availability 24/7 and 365 days a year - significantly broadens investors' access to the precious metal.
You can purchase XAUt directly from Tether or via the secondary market. While the latter option has no restrictions, you need to pass Know Your Customer (KYC) checks and buy at least 50 XAUt (worth $132,500 as of October 14, 2024).
In addition to a non-refundable verification deposit of 150 USDT (or the equivalent in EURT or CNHT), Tether charges a one-time 25 basis point fee when you purchase or redeem Tether Gold from the issuer. In the case of redemption, additional fees may apply. That said, you are not subject to any transaction fees for secondary market transfers or custody costs with XAUt.
As a blockchain-based token, you can transfer, store, and use XAUt as any other cryptocurrency. Except for the value peg to the precious metal, Tether Gold retains most of the qualities of digital assets, including enhanced traceability, transparency, and security. Most importantly, XAUt can be sent and received directly between users with inexpensive fees and instantaneous transactions, especially when compared to physical gold transfers.
How Do You Redeem Tether Gold?
To redeem Tether Gold for physical gold bars, you must register an account with TG Commodities Limited and verify it.
After signing into your verified account, you must ensure that you have at least as much XAUt that equals the value of a full gold bar. This is necessary, as Tether can only redeem tokenised gold for physical bullion in increments of one whole gold bar. Thus, the company advises holders to deposit at least 430 XAUt ($1.14 million).
Upon successful deposit, Tether will reallocate your XAUt to one or more whole bars of gold based on the actual number of fine troy ounces contained in your full gold bars.
After redemption for gold, you have two options:
Physical delivery: You can request a physical delivery from Tether for your gold bars to a delivery address in Switzerland.
Sell for cash: Instead of physical delivery, you may also order Tether to sell your gold in the Swiss gold market and pay you the cash proceeds of the sale.
In any case, Tether charges a 25 basis points fee for redemption and the cost of delivery (in the case of physical gold delivery).
Buy Tether Gold (XAUt) on VALR
Tether Gold is a leading gold-backed token that expands accessibility to bullion investments, simplifies precious metal transfers, and significantly reduces the costs of gold transactions. With seamless exposure to gold, XAUt may come in handy for investors looking to combat inflation, hedge against crypto and general market risks, or preserve wealth with a sound store of value.
You can buy Tether Gold directly from Tether, which requires you to purchase a minimum of 50 XAUt. Since this is a significant sum, an easier option is to trade the asset on the secondary market. Through a cryptocurrency exchange like VALR, you can gain seamless exposure to the digital asset with competitive fees and without minimum purchase amount requirements.
Are you ready to buy XAUt? Head to VALR to get started!
You can trade XAUt on VALR's Spot market with South African rands (XAUt/ZAR) …
… or buy XAUt via the Simple Buy/Sell feature using USDT, USDC, FDUSD, EURC, or Bitcoin.
Frequently Asked Questions (FAQ)
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No, you can't mine Tether Gold. Instead, the token's supply is directly linked to the gold reserves held by Tether and the current demand for XAUt.
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Tether Gold is issued by TG Commodities Limited, a subsidiary of the USDT issuer Tether Limited. That said, XAUt is not owned by any company; instead, its owners are the users who hold the token in their wallets.
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Tether Gold follows the price of one troy fine ounce of gold. As an excellent store of value, the precious metal provided investors with consistent returns in the long run. However, you should do your own due diligence before making an investment in the asset.
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate.
VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
