Prices of tokenized gold assets Tether Gold (XAUt) and Pax Gold (PAXG) dropped over 6% in the past 24 hours, mirroring the steep decline in physical gold prices. This significant drop came as the precious metal experienced its most dramatic intraday fall in over a decade, slipping more than 6% in a single session. The downturn coincided with a rally in equities and a modest uptick across major cryptocurrencies, including Bitcoin, which climbed above $112,000.
While broader crypto markets and stock indices surged on the back of strong earnings reports from Wall Street, traditionally safe-haven assets like gold came under pressure. This shift in investor sentiment has raised speculation about a potential capital rotation from gold to riskier assets such as Bitcoin. As gold prices slid below $4,120 per ounce, tokenized gold assets like XAUt and PAXG followed suit, trading around the same level at the time of reporting.
Market analysts note that the synchronized fall of XAUt and PAXG highlights their close correlation with the physical gold market. Both tokens are backed by actual gold reserves, and their price movements typically reflect those of the underlying commodity. On October 17, 2024, XAUt and PAXG had reached highs of $4,391 and $4,430 respectively, riding on the coattails of gold’s explosive rally. But as the rally lost momentum, both digital gold tokens began to reverse gains.
The recent price action has renewed debate about the long-term viability of gold as a hedge in the face of growing interest in digital assets. While Bitcoin gained 2% during the same period, some investors interpreted the simultaneous drop in gold as evidence of changing preferences among institutional and retail traders alike.
Economist and long-time gold supporter Peter Schiff weighed in on the situation, describing the gold pullback as a “shakeout.” He acknowledged the sharp decline but pointed out that gold’s current level — still above $4,100 — remains near historic highs. According to Schiff, the selloff offers Bitcoin holders “another window” to exit digital assets and invest in what he calls “real” money — physical gold.
The contrasting performance between gold and Bitcoin has intensified discussions around the so-called “great rotation” — a hypothetical shift in capital from traditional safe havens to more speculative and growth-oriented assets such as cryptocurrencies. While no definitive trend has been confirmed, the current market dynamics suggest that investors are growing more comfortable with risk, especially in light of positive economic indicators and corporate earnings.
Beyond the headlines, the selloff also raises questions about the role of tokenized commodities in diversified portfolios. XAUt and PAXG were designed to offer the stability of gold with the flexibility of blockchain-based assets. However, their susceptibility to the same market forces affecting physical gold means they may not offer the kind of insulation that some investors hoped for.
Another factor contributing to gold’s decline may be the strengthening U.S. dollar and rising bond yields, both of which reduce the appeal of non-yielding assets like gold. With central banks signaling a more hawkish stance, market participants could be reallocating funds in anticipation of higher interest rates, which historically exert downward pressure on gold prices.
In contrast, the crypto sector continues to benefit from growing institutional adoption and favorable sentiment. Bitcoin, in particular, has seen increased demand as a potential hedge against inflation and monetary debasement — roles traditionally reserved for gold. This shifting narrative could further influence the performance of tokenized gold assets, which may struggle to compete with the growth potential of major cryptocurrencies.
Despite the recent correction, gold remains a critical component of many investment strategies, and the long-term utility of tokenized gold should not be dismissed. XAUt and PAXG offer unique advantages in terms of accessibility, liquidity, and transparency. For investors seeking exposure to gold without the logistical complexities of physical ownership, these tokens remain attractive options.
Looking ahead, market watchers will be closely monitoring macroeconomic developments, including Federal Reserve policy decisions, inflation data, and geopolitical events, all of which could impact both gold and crypto markets. In times of uncertainty, the interplay between traditional and digital safe-haven assets will likely continue to evolve.
Ultimately, the current divergence between gold and Bitcoin underscores the fluid nature of investor sentiment and the increasing complexity of portfolio allocation in a rapidly changing financial landscape. Whether this marks the beginning of a broader shift or a temporary anomaly remains to be seen, but one thing is clear: the financial world is in a state of transformation, and digital assets are playing an increasingly central role.