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The Best Precious Metal-Backed Cryptos

An in-depth guide to cryptocurrencies backed by precious metals

Summary

• Crypto backed by precious metals combine technology with tangible asset backing

• Gold and silver backed cryptocurrency offer digital ownership of real gold and silver

• These cryptos provide stability compared to volatile traditional cryptocurrencies

• Investors can use metal-backed cryptos as a hedge against fiat devaluation

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What Are Precious Metal-Backed Cryptos?

You might be familiar with Bitcoin, but did you know that there are cryptocurrencies linked to commodities? Among these tokens are precious metal-backed crypto. These digital assets are tied to physical metals such as gold and silver.

There is a really nice benefit to utilizing metal-backed crypto since these tokens allow you to trade at the value of gold and silver, while enabling digital transfer and trading.

How Do Metal-Backed Cryptocurrencies Work?

Now that you have an idea of what these tokens are, let's get into how they work.

Think of each metal-backed cryptocurrency as being pegged to a real-world asset, like gold, silver, or platinum. The issuer (or creator) of the crypto holds the equivalent amount of the physical metal in a secure vault.

Some people might wonder how investors can be sure the tokens are actually backed by metals? This is usually done through regular reserve audits.

A huge advantage to metal-backed crypto is that investors can buy, trade, or redeem these tokens, with some issuers allowing physical redemption for real gold or silver.

The Breakdown:

• Each token represents ownership of a specific amount of a precious metal.

• The underlying physical gold is stored in secure vaults, with audits verifying reserves.

• Investors can trade, hold, or even redeem their tokens for physical metal.

How Are Metal-Backed Tokens Different From Other Cryptocurrencies?

Bitcoin gets its value from its scarcity. Its price is heavily influenced by supply and demand because of its finite quantity and the halving events that reduce the number of Bitcoins that can be mined during each cycle.

While people might call Bitcoin "digital gold", Bitcoin isn't supported by any physical assets or commodities. It's worth comes from being used as a store of value, and it's ability to potentially replace fiat currencies.

Now, metal-backed tokens, on the other hand, have the benefit of being tradeable or exchangeable for the actual metals or converted into USD at the equivalent value of the metal.

This can be a good way for a crypto investor to get exposure to crypto with less price volatility since these tokens act as a type of stablecoin.

Gold-Backed Cryptocurrencies: The Most Popular Choice

Out of all the metal-backed cryptos, gold-backed digital currency are the most common digital assets. The reason for this is the price stability and the intrinsic value of gold bullion that makes this an attractive choice for investors.

When looking at these kinds of tokens, keep in mind that you will need to check factors such as:

• The current price per token.

• The trading volume.

• The market map.

Tokens that have lower market caps might have more limited adoption and that's something to keep in mind if you plan to hold the tokens long term. It's preferable to stick with ones that have a strong trading volume overtime.

Now, let's get into the two best gold backed cryptocurrencies currently on the market.

PAXG (Pax Gold)

If you’ve ever wanted to own gold without dealing with the headaches of physical storage, Paxos Gold (PAXG) could very well be the perfect solution for you.

You can basically think of it as owning gold without the vault, the security risks, or the inconvenience of selling it when you need cash.

Traditional gold investments often come with high premiums, storage fees, and then you can have long settlement times. Crypto tokens like PAXG give you all the benefits of owning real, investment-grade gold —without the drawbacks.

For some background on Paxos Gold, or PAXG, they are a gold-backed cryptocurrency where each token is pegged to one fine troy ounce of gold stored in London Bullion Market Association (LBMA) vaults.

If you decided to buy and hold PAXG, you would own the underlying physical gold bullion , making it different from a gold ETF or a futures contract.

This isn’t just a digital representation of gold—it’s real gold in digital form that you can buy, sell, and even redeem for physical gold bars.

How PAGX Compared to Traditional Gold Investments

Cost-Efficient Gold Ownership

Gold is a fantastic hedge against inflation, but let’s be honest—buying it can be pretty expensive. The traditional route you deal with premiums, storage costs, and liquidation fees. Those are all things that would eat into your profits.

Gold-backed tokens like PAXG have a low-cost structure compared to gold ETFs, futures contracts, and even LBMA 400-ounce gold bars.

Plus, there are zero storage fees.

Regulated and Secure

Paxos Trust Company is the issuer of PAXG and they are regulated by the New York State Department of Financial Services (NYDFS).They have monthly audits to verify its physical gold reserves.

Another cool aspect with PAXG is that you can check your gold’s serial number using the Paxos Gold Allocation Lookup tool.

Instant Settlement, No Counterparty Risk

Have you ever tried cashing out a gold ETF? Usually, you'd be looking at a T+2 settlement period, meaning you have to wait two business days to get your money.

PAXG settles instantly on the blockchain so you have immediate access to your funds. It’s basically gold ownership without the delays and settlement risks.

Redeemable for Real Gold

And let's not forget the best part—you can redeem your tokens for LBMA-accredited Good Delivery gold bars .

Institutional investors even have the option to convert their holdings into unallocated gold, which is how banks and major gold traders handle large transactions.

For something more simple, like if you just want cash, you can sell your PAXG at market rates anytime. Pretty nice, isn't it?

The Breakdown

• Backed 1:1 by physical gold stored in LBMA vaults.

• No storage fees and lower costs than traditional gold investments.

• Regulated and audited for full transparency.

• Instant blockchain settlement—no waiting days to liquidate your gold.

• Redeemable for physical gold or tradeable like any other cryptocurrency.

XAUT (Tether Gold)

Similar to PAXG, XAUT (Tether Gold) is a gold-backed cryptocurrency that gives you real ownership of physical gold , but through crypto.

Instead of storing heavy bars in a vault (or worse, under your mattress), XAUt provides you the ability to get gold on the blockchain that you can trade, send, or even redeem for actual gold bars in Switzerland.

For some background on XAUt, it was launched in 2020 by TG Commodities, S.A. de C.V. This was developed by Tether, the company behind the creation of the USDT stablecoin. XAUT is a digital token backed 1:1 by physical gold that meets the London Bullion Market Association’s (LBMA) Good Delivery standards.

In simple terms, that means every XAUT token represents one fine troy ounce of real, investment-grade gold , stored securely in Swiss vaults.

The Breakdown:

• Developed by Tether, the company behind USDT stablecoin.

• Each XAUT token is backed by one troy ounce of gold stored in Swiss vaults.

Silver-Backed Cryptos: A Growing Trend

We covered gold-backed tokens, but what about silver? There are silver-backed tokens, but their trade volume isn't as high.

Kinesis Silver (KAG)

Kinesis Silver (KAG) is an example of a silver-backed crypto currency.

One major advantage of KAG is that they let token holders earn yields just for holding their silver.

Yes, KAG actually pays you. Just by holding, trading, or spending your silver-backed crypto, you earn a yield paid out in physical silver every month. This is something no traditional silver investment offers.

Like PAXG, KAG gives you direct ownership of real, physical silver bullion. Every KAG token is backed by fully allocated silver, stored in insured vaults across six continents. KAG’s silver supply is managed by the Allocated Bullion Exchange (ABX) and is audited biannually by independent commodity specialists.

If you ever want to have your silver physically delivered to you, you can redeem your silver starting at just 200 ounces and pick it up from localized redemption hubs worldwide.

They also offer Kinesis Gold (KAU), which is their gold token that provides similar benefits as KAG.

The Breakdown:

• Each KAG token is backed by 1 gram of silver, stored in audited vaults.

• Offers a yield system where users can earn rewards based on transactions.

Other Precious Metal-Backed Cryptos

Gold and silver are the most common, but other precious metals have also made their debut in crypto. There are platinum, palladium and rhodium backed cryptos. But keep in mind, these tokens could potentially be more volatile. Check for factors such as audits, trading volume and transparency.

Pros and Cons of Metal-Backed Cryptos

The Advantages

• Stability: Less volatile than traditional cryptos

• Inflation Hedge: Protects against fiat currency devaluation

• Liquidity: Easily traded on crypto exchanges

• Asset-Backed: Physical reserves provide real-world value

The Disadvantages

• Centralization Risk: Relies on third-party vaults and audits

• Redemption Limits: Not all cryptos allow easy physical redemption

• Regulatory Uncertainty: Varies across different jurisdictions

• Storage and Custody Costs: Maintaining vaults adds operational expenses

How to Invest in Precious Metal-Backed Cryptos

Now that we've covered the topic of gold-backed cryptocurrencies, let's cover how to be cautious and safe within the crypto-trading market while searching for these tokens.

Choosing the Right Metal-Backed Crypto

• You'll want to look for well-audited projects with verified reserves

• Consider the trade volume, the liquidity and exchange availability.

• Evaluate the transaction fees for buying, holding, and redeeming tokens.

• Follow a risk management plan and don't overextend.

• Make sure the exchange allows accounts/trades for residents for the country you reside in.

• Don't be afraid to seek the advice of a professional.

Where to Buy Precious Metal-Backed Cryptos

• Crypto Exchanges: Kraken, KuCoin

• DeFi Swaps:Uniswap

• Official Issuer Platforms: Paxos (PAXG), Tether (XAUT)

Storage and Security Considerations

• Store tokens in secure wallets (hardware or cold wallets recommended).

• Verify any custodianship and policies of the issuing platform.

Final Thoughts

Robert Kiyosaki often talks about "real assets" vs. paper assets —and in a way PAXG falls squarely in the real asset category.

Unlike fiat currency, which loses value over time, and stock markets, which can be unpredictable at best, gold has been a store of value for thousands of years .

Kings, emperors, and central banks have all hoarded gold because they know one valuable thing: gold holds its value when paper money doesn’t.

Gold-backed crypto might be new to the precious metals industry, but it takes that reliability and combines it with the speed, convenience and the flexibility of blockchain tech.

If you believe in owning hard assets but don’t want to deal with the hassle of physical gold then gold-backed crypto might be the right fit for you.

It’s realgold, realownership, but with the efficiency of crypto —it's a way to have your cake and eat it too. Ultimately, a win-win scenario is what everyone wants, isn't it?

Keep researching, keep investing, and aim for building your financial freedom one investment at a time.

(Disclaimer: This article is not financial advice and is intended for educational purposes only. It is important to conduct thorough research and only invest an amount that you are comfortable potentially losing. For personalized financial advice, consult a professional.)