What Impact Can We Expect from the Tokenization of Gold?

Gold has been in the news a lot this year, as the price of the precious metal has reached a series of all-time highs. While this is regarded as a traditional asset, how could the introduction of tokenization technology be set to transform the commodities market?  

How Does The Tokenization Process Work?

Tokenization involves taking a real-world asset and converting it into a digital token on the blockchain, through the use of a smart contract. This adds security and speed to each transaction, with the added bonus that fractional ownership allows investors to choose exactly how much exposure to the asset they want.

The real estate, art, and stock markets have already undergone the tokenization process to different degrees, but a closer look at the subject confirms that gold only accounts for around $3 billion of the real-world assets tokenization sector. Bearing in mind that the overall gold market is worth over $27 trillion, this suggests that there is significant room for growth. 

Tether Gold (XAUT) is a cryptocurrency that shows how this market works. The company says that it stores 11.6 tons of physical gold in vaults in Switzerland. This means that investors can buy the token to instantly gain access to gold exposure in their portfolio. Tether CEO Paolo Ardoino pointed out that they’ve seen growing interest in the token from people who look to retain the value of their money but are worried about the stability of their local fiat currencies. 

What Effect Will It Have on the Gold Market?

The fractional ownership and easy access offered by tokenized assets mean that they provide an easier route to owning gold. This is a way for investors to obtain exposure to the amount of gold that suits them, with no need to worry about physical ownership or high entry barriers. If this leads to new investors entering the market, it should increase liquidity, although this isn’t a guarantee that gold’s price will rise. 

This isn’t the only way to invest in gold or other commodities, with this commodity trading platform showing how contracts for difference (CFDs) can be used to trade based on whether you think the price will go up or down. Like tokenized gold, this approach doesn’t require the investor to physically own the underlying asset. Leverage can be used to amplify the results achieved from price movements.

What Other Commodities Are Being Tokenized?

Wider investor access and greater transparency are among the benefits that are helping to increase interest in tokenized commodities. Agricultural products, natural gas, and metals like copper and silver are among the other leading commodities that are being tokenized. 

In theory, any commodity can be tokenized using this process, with companies such as World Liberty Financial and Davis Commodities Limited among those that are said to be currently exploring ways of bringing tokenized assets to a wider audience. 

Gold’s price rally in 2025 has brought greater attention to tokenized versions of the metal, but it’s just a part of the overall tokenized assets sector, which we can expect to see grow in the next few years.