Tether, a prominent player in the cryptocurrency market, is scaling up its physical gold purchases as it strives to diversify its investment portfolio significantly. The company aims to increase its gold holdings to between 10-15% of its total investments, up from approximately 7%. This strategy could involve several billion dollars in new acquisitions as Tether ramps up its activities.
As of now, Tether possesses between 130 and 140 metric tons of physical gold, translating to a staggering valuation of around $23-24 billion. This gold reserve places Tether among the largest non-sovereign gold holders globally, ahead of major financial institutions and corporations. According to recent statements from CEO Paolo Ardoino, Tether plans to acquire one to two tons of gold per week over at least the next few months.
Gold Market Impact
This increased allocation of gold accounts for about 12-13% of Tether’s overall holdings. Tether’s approach involves sourcing gold through over-the-counter markets and trusted Swiss refiners, distancing itself from volatile futures exchanges. At an annualized rate of 50-100 tons, Tether’s gold purchases alone could represent a noteworthy 1-2% of the global yearly supply.
Global production of gold sits around 3,500-3,600 metric tons annually, augmented by 1,200-1,500 tons from recycled sources. However, given the relatively fixed nature of gold supply, these purchases could introduce tighter physical liquidity in the market, particularly impacting price dynamics. Weekly purchases from Tether represent a minor fraction of daily global trading volumes, yet the predictability of their acquisition strategy helps establish a psychological price floor for investors.
Market analysts suggest that Tether’s further forays into gold could yield a short-term price increase of 1-3%, especially in contexts where the dollar weakens, real yields decline, or geopolitical uncertainties mount. Ardoino’s characterization of gold as a reserve asset akin to those held by central banks mirrors a larger trend, as global institutions have reportedly acquired over 1,000 tons of gold yearly in recent times.
Tokenized Gold Surges
In tandem with the physical gold market’s upswing, tokenized gold assets are also experiencing a significant rally. Tether Gold (XAUT) recently surged by 5.8%, rising to over $5,543. Pax Gold (PAXG) followed closely behind, increasing by 5.9% to $5,561. These tokens offer investors an innovative avenue for exposure to gold prices without the need to physically handle the metal.
January saw Pax Gold recording inflows of up to $248 million, further showcasing the growing appetite for gold-backed digital assets. Spot prices for gold have climbed over the $5,500 mark for the first time, influenced by various factors, including the Federal Reserve’s decision to maintain interest rates.
As it stands, gold prices have shown a remarkable year-to-date increase of nearly 30%, pricing at $5,549 as of this writing. While Tether’s substantial purchases contribute to creating a structural demand floor for gold, its impact on the overall market remains relatively modest.
