Should You Buy PAX Gold or Tether Gold? Comparing the Top Tokenized Gold Assets

Global financial markets have seen dramatic shifts in recent years. In Q3 2025, the price of gold surged to historic highs, even surpassing $4,000 per ounce. In this climate, investors are increasingly seeking ways to combine the security of physical assets with the speed and transparency of blockchain technology.

Enter the booming world of tokenized gold—a market that crossed $3 billion in total value by Fall 2025. Leading this space are two dominant players: PAX Gold (PAXG) and Tether Gold (XAUT). Both claim to offer secure, efficient access to physical gold via blockchain. But beneath the surface, they differ in key ways that matter for serious investors.

Let’s break down the pros and cons of each to help you make an informed decision.

What Is Tokenized Gold?

Tokenized gold is a type of commodity-backed stablecoin. Unlike fiat-backed stablecoins like USDT or USDC, these tokens are directly pegged to the market price of physical gold.

Here’s how it works:

• A trusted issuer purchases standardized gold bars and stores them in secure, insured vaults (often approved by the London Bullion Market Association—LBMA).
• The issuer then mints digital tokens on a blockchain (typically Ethereum), each representing a specific portion of that gold.
• The most common unit is one troy ounce (about 31.1 grams) per token.

Deep Dive into PAX Gold (PAXG): Trust, Transparency, and Regulation

PAX Gold (PAXG) is one of the most respected tokenized gold assets, built on a foundation of regulatory compliance, transparency, and institutional-grade security.

Issuer and Legal Oversight

• PAXG is issued by Paxos Trust Company, a New York-based financial firm.
• Paxos operates under direct supervision of the New York State Department of Financial Services (NYDFS).
• This regulatory framework ensures that customer gold holdings are legally separated from company assets and protected from bankruptcy.

Physical Backing and Vault Storage

• Each PAXG token is backed by one troy ounce of a 400-ounce London Good Delivery gold bar.
• These bars are stored in ultra-secure vaults operated by Brink’s in London—one of the world’s most trusted custodians.

Unmatched Transparency

• Monthly audits are conducted by KPMG, one of the “Big Four” accounting firms, verifying that every PAXG token is fully backed by physical gold.
• Paxos offers an Allocation Lookup Tool that lets users enter their Ethereum wallet address to view the serial number, purity, and weight of the gold bar they partially own. No other project offers this level of transparency

Fee Structure

PAX Gold (PAXG) employs a fee model tailored for institutional investors and long-term holders rather than frequent traders.

• Storage Fee: None.
• Issuance & Redemption: Tiered structure — approximately 1% for small orders (less than 25 tokens), decreasing to 0.125% for large orders (more than 800 tokens).
• On-Chain Transfer: 0.02% of the transaction amount, plus standard Ethereum gas fees.

🔸 This fee model highlights PAXG’s focus on large-scale gold allocation rather than active trading.

PAX Gold: Strengths and Weaknesses

The fee structure of PAX Gold suggests that the token is not optimized for frequent, day-to-day trading. Its 0.02% on-chain transfer fee can become costly for high-volume activity. Instead, the tiered issuance fees—offering substantial discounts for large orders—clearly target institutional investors, funds, and individuals aiming to purchase and hold significant amounts of gold over the long term.

Strengths:

• Regulatory clarity: Paxos is regulated by NYDFS and offers legal ownership of allocated gold bars.
• High liquidity: Listed on major exchanges with deep order books and active derivatives markets.
• DeFi compatibility: Can be used as collateral, in lending platforms, and liquidity pools.
• Low issuance fees and zero storage costs

Weaknesses:

• No physical redemption for retail users (minimum ~430 tokens required)
• Limited to Ethereum network, which can mean high gas fees
• Strict KYC requirements

Tether Gold (XAUT) Review: A Token Built for Liquidity

Tether Gold (XAUT) is the primary competitor to PAX Gold (PAXG), issued by a globally recognized name in the stablecoin space. Backed by physical gold and designed with a different philosophy, XAUT offers a unique approach to tokenized gold.

Issuer and Regulatory Framework

• XAUT is issued by TG Commodities Limited, a subsidiary of Tether Holdings, the same company behind the world’s largest stablecoin, USDT.
• Unlike Paxos, which operates under strict U.S. regulatory oversight (NYDFS), Tether Gold is not regulated by U.S. authorities. Instead, it holds licenses in jurisdictions like El Salvador.
• This divergence reflects fundamentally different approaches to compliance and target markets.

Gold Backing and Storage

• Each XAUT token represents one troy ounce of LBMA-standard physical gold.
• A key difference lies in storage: while PAXG’s gold is held in Brink’s vaults in London, XAUT’s gold is stored in secure vaults in Switzerland, a country renowned for its legacy of asset protection.

Transparency and Auditing

Transparency has long been a point of contention for Tether, and XAUT is no exception.

• Quarterly attestations: Unlike PAXG’s monthly audits, XAUT publishes reserve reports only once per quarter.
• Unclear auditor identity: While Paxos openly names KPMG as its auditor, Tether has not disclosed a globally recognized third-party auditor for XAUT. Some reports suggest that attestations may be issued internally by TG Commodities, raising concerns about independent verification.
• Tether does offer an online reserve lookup tool, but it lacks the granularity of PAXG’s system, which links each token to a specific gold bar serial number.

Fee Structure

Tether Gold (XAUT) mirrors the USDT model, prioritizing liquidity, accessibility, and low friction.

• Storage Fee: None.
• Issuance & Redemption: A flat 0.25% one-time fee applies when buying or redeeming XAUT directly from Tether.
• On-Chain Transfer: No additional transfer fees, aside from standard gas fees.
• Blockchain Support: XAUT is available on Ethereum (ERC-20) and Tron (TRC-20) networks.

🔸 The absence of on-chain transfer fees and support for low-cost networks like Tron make XAUT especially attractive for active traders and users in emerging markets.

Why XAUT Has a Larger Market Cap Than PAXG

Despite offering less transparency, Tether Gold boasts a market cap of $2.1 billion, surpassing PAXG’s $1.33 billion. This is largely due to:

• Zero transfer fees, ideal for high-frequency trading
• Multi-chain support, including Tron and TON
• Strong integration with the Tether ecosystem, making it easily accessible to USDT users

Tether Gold: Strengths and Weaknesses

Strengths:

• Multi-chain accessibility: Available on Ethereum, Tron, and TON, reducing transaction costs and increasing global reach
• Tether ecosystem integration: Seamless access for USDT users on major exchanges
• Larger market cap: Commands over 55% of the tokenized gold market

Weaknesses:

• Lack of U.S. regulatory oversight; operates under El Salvador jurisdiction
• No comprehensive third-party audits
• Physical redemption limited to large holders
• Lower exchange listing coverage and trading volume compared to PAXG

PAXG vs. XAUT: Which Tokenized Gold Asset Wins?

Choosing between PAX Gold and Tether Gold depends on your priorities—regulatory trust, transparency, fees, and liquidity. Here’s a side-by-side comparison to help you decide:

Regulation and Legal Ownership

• PAXG offers direct legal ownership of allocated gold bars, protected under New York trust law. In case of bankruptcy, token holders retain full rights to their gold.
• XAUT holders are technically creditors of TG Commodities. While the gold exists in vaults, ownership rights are not directly transferred to users, and redemption is at Tether’s discretion.

Liquidity and Exchange Listings

• PAXG is listed on major exchanges like Binance, Coinbase, Kraken, and OKX, with daily trading volumes between $50M–$80M. Derivatives markets are also active.
• XAUT is primarily traded on Bybit, Bitfinex, and KuCoin, with lower daily volumes ($30M–$50M). However, its presence on Tron makes it more accessible to users seeking low-cost transactions.

Cost Efficiency

• For active traders: XAUT is cheaper due to zero transfer fees and multi-chain support.
• For long-term holders: Both are solid choices with no storage fees.
• For institutional investors: PAXG’s tiered issuance fee (as low as 0.125%) is more cost-effective than XAUT’s flat 0.25%—especially for large allocations.

Redemption and DeFi Integration

• Both tokens require a minimum of ~430 tokens for physical redemption. Tether also requires at least 50 tokens for direct purchases.
• PAXG is widely accepted in DeFi protocols like MakerDAO, Compound, and Synthetix, making it a strong choice for collateralized strategies.
• XAUT has limited DeFi adoption, likely due to regulatory ambiguity.

Legal Structure and Ownership

PAX Gold (PAXG) gives holders direct legal ownership of specific gold bars, protected under New York trust law. This means the gold is held separately from Paxos’ assets and remains accessible even in case of bankruptcy.

Tether Gold (XAUT) holders, however, are considered creditors of TG Commodities. While the gold is stored in secure Swiss vaults, ownership isn’t directly transferred to users, and redemption is at Tether’s discretion—offering less legal clarity and protection.

What You Should Know Before Buying Tokenized Gold

While tokenized gold offers a modern way to access physical assets, it’s not without risk. Understanding these risks is essential for protecting your capital.

Counterparty Risk

This is the most significant shared risk between PAXG and XAUT. You don’t directly own the gold in the vault—you own a token that represents a claim to it. You must trust the issuer (Paxos or Tether) to actually hold the gold, manage it properly, and remain solvent.

Centralization Risk

Unlike Bitcoin, tokenized gold is fully centralized. The issuer has both the technical and legal ability to blacklist wallet addresses and freeze assets. Paxos has previously exercised this power on wallets linked to the collapsed FTX exchange. This is the trade-off for regulatory compliance.

Final Verdict: Should You Buy PAX Gold or Tether Gold?

Choosing between PAXG and XAUT isn’t about which is “better”—it’s about aligning with your investment priorities.

Choose PAX Gold (PAXG) if:

• You prioritize maximum transparency and strict regulatory oversight
• You’re a long-term holder who doesn’t plan frequent transfers (due to the 0.02% transfer fee)
• You want to use your gold as collateral in regulated DeFi platforms
• You’re an institutional investor who values monthly audits by KPMG and NYDFS supervision

Choose Tether Gold (XAUT) if:

• You prioritize high liquidity, speed, and low transaction costs
• You’re an active trader who frequently moves tokens (benefiting from zero transfer fees)
• You operate outside U.S. jurisdictions and prefer networks like Tron for lower gas fees
• You’re comfortable with less frequent audits and trust the Tether brand

For a moderately informed investor seeking long-term value preservation, PAXG holds a slight edge due to its unmatched transparency and regulatory safeguards. However, for active traders, XAUT remains the king of liquidity and cost-efficiency in the tokenized gold space.

Final Thoughts in Simple Words

If you value regulatory clarity, audit transparency, and institutional-grade custody, PAXG is the clear winner. But if your priority is low-cost trading, multi-chain access, and ease of use, XAUT might be the better fit—especially for users outside the U.S. regulatory sphere.

Frequently Asked Questions (FAQ)

Why is the minimum physical redemption so high for gold tokens?

Issuing and delivering standard gold bars is expensive. To reduce logistics costs, issuers limit physical redemption to large holders. Retail users benefit more from digital liquidity than physical delivery.

How is the security of the gold backing these tokens guaranteed?

Through physical vaulting and regular audits. Gold is stored in secure, insured vaults in London and Switzerland. Periodic audit reports confirm that each circulating token is backed by real gold.

Can token prices deviate from spot gold prices?

Yes, but only slightly. PAXG and XAUT usually track spot gold closely. However, during high volatility, small premiums or discounts may appear due to liquidity, fees, and exchange demand.

Is tokenized gold a good hedge against inflation?

Gold is traditionally seen as a store of value and inflation hedge. Tokenized gold offers the same benefits with faster, lower-cost access. However, its success depends on public trust in issuers and crypto market stability.

What happens if Paxos or Tether goes bankrupt?

This is where regulation matters. PAXG is bankruptcy-remote, meaning its gold reserves are legally separated from Paxos’ corporate assets. Token holders retain full access to their gold. In contrast, XAUT’s legal structure is more complex, and with less regulatory oversight, counterparty risk is potentially higher.