What Is Tokenized Gold? How Gold-Backed Tokens Work and Seven Things to Check

Tokenized gold is gold in a vault with a digital receipt on a blockchain. The receipt is a token. You can send it, trade it at any hour, and split it into tiny pieces. The gold does not move.

That is the whole idea. Everything else is detail, and the detail is where the risk lives.

How it works

1. An issuer buys gold bars. The large issuers say they hold London Good Delivery bars. That is the standard set by the LBMA, the London Bullion Market Association. A Good Delivery bar weighs about 400 troy ounces.
2. A custodian stores the bars in a vault. Paxos says the gold behind PAX Gold sits in LBMA vaults in London. Tether Gold’s disclosure document says its gold is held by a custodian in a vault in Switzerland.
3. The issuer creates tokens to match. For PAXG and XAUT, one token is one fine troy ounce. Several smaller tokens are priced at about one gram of gold.
4. Tokens trade on exchanges and move between wallets. They can be split. Tether Gold says XAUT divides to six decimal places.
5. Some holders can redeem. That means handing tokens back to the issuer for metal or for cash. The rules are strict, as you will see below.

Both large issuers run a lookup tool. You enter a wallet address, and it shows the serial number and weight of the bar linked to your tokens. Paxos notes its tool works for tokens held in your own wallet, not for tokens an exchange holds for you.

How big is it?

Small, next to the gold market. On October 17, 2026, the 13 gold tokens we counted from CoinGecko data came to about $5.8 billion. CoinGecko’s own category total is higher, about $5.9 billion, because it includes tokens we left out. Tether Gold (XAUT) and PAX Gold (PAXG) held about 89% of that. Our market snapshot has the full table.

Why people use it

Issuers make three main points. These are their claims:

• It trades all the time. Tether Gold points out that token markets run 24 hours a day, every day, while traditional gold markets close.
• It comes in small sizes. Paxos’s product page lists a minimum purchase of 0.01 troy ounce. A Paxos support page says 0.03 PAXG, because of a 0.02 PAXG fee that Paxos now says is waived through January 1, 2027. A whole Good Delivery bar costs well over a million dollars.
• Storage is cheap. Paxos says it charges no storage fee at this time. Tether Gold says it charges no custody fee. Tether Gold charges 0.25% when you buy from or redeem with it directly. Paxos charges a fee when you redeem with it directly. It says its fee for buying new tokens is waived through January 1, 2027. Read the terms too. Paxos’s terms let it add a storage fee later by issuing itself new tokens, with at least 30 days’ notice.

Paxos publishes a table comparing PAXG with gold funds, futures, and bars. It is a useful list of things to compare. It is also a seller’s table, so read it that way.

Where the risk is

You are trusting an issuer and a custodian. The token is a claim. If the issuer fails, what you own depends on its terms and on the law where it sits. Read the terms.

A reserve report is not an audit of the company. In 2023, staff at the PCAOB, the US regulator of public company auditors, warned that proof-of-reserve reports are not audits. We explain the different kinds of report in Attestation, Audit, or Proof of Reserves.

You may not be allowed to redeem. Tether Gold’s FAQ says “U.S. persons are prohibited from purchasing or redeeming XAU₮.” Paxos says PAXG is currently unavailable in the EU. If you cannot deal with the issuer, your only exit is selling to another buyer.

Redeeming for metal means whole bars. Tether Gold redeems only in full bars. It advises depositing 430 XAUT to be sure of covering one, and it delivers within Switzerland only. For most holders, “redeemable for gold” really means “sellable for cash.”

It may not trade. Market value is price times reported supply. It is not a count of buyers. In our October snapshot, one token showed $12.8 million of market value and no reported trading in a day.

The technology can fail. Tokens live on blockchains and in smart contracts. Bugs, hacks, and lost keys are real risks that a gold bar in a vault does not have.

Registration is not approval. Tether Gold’s own disclosure document says its registration in El Salvador “does not imply certification” of the token’s quality or the issuer’s solvency.

A regulator’s view

In September 2026 the UK’s Financial Conduct Authority wrote that “inconsistent practice continues to exist in the tokenised gold space,” unlike the gold ETF market. It listed what holders should be able to compare: how the gold is kept safe and insured, whether redemption works, how far the product is regulated, the fees and minimums, and what happens if a firm in the chain fails. We cover that paper in What the UK’s Tokenized Gold Paper Actually Asks.

Seven things to check before you trust a gold token

1. Who is the issuer, and where? Find a legal name and a country. No name, no trust.
2. Where is the gold, and who holds it? Look for a named custodian or vault location in a document, not only on a marketing page.
3. Who reports on the reserves? How often, under what standard, and how old is the latest report?
4. Can you look up your bar? A serial number tied to your wallet is a good sign. It is not proof on its own.
5. Can you redeem? In your country, for what, with what minimum, and at what fee?
6. Does it trade? Compare daily volume with market value. A token you cannot sell is not like gold.
7. What is one token? An ounce and a gram are very different prices.

If an issuer answers all seven in public documents, you can at least judge it. If it does not, that tells you something too.

This article explains how these products work. It is not advice to hold any of them.