Gold-Backed Cryptocurrencies Are Having a Moment in the Spotlight, with Tether’s XAUT Leading the Pack

Gold-backed cryptocurrencies are having a moment in the spotlight, with Tether's XAUT leading the pack as investors seek shelter from economic uncertainty.

The cryptocurrency market saw limited changes on Friday, with Tether’s XAUT, a tokenized gold asset, leading the gains as investors sought shelter from economic uncertainty.

The token, which tracks the price of gold, surged 3.4% in the last 24 hours, making it the top-performing digital asset among the major cryptocurrencies. The broader tokenized gold sector also increased by 4.3% during the same period, according to CoinGecko data.

In contrast, the CoinDesk 20, which follows the largest digital assets, went down by 2%.

Among the major cryptocurrencies, only Stellar’s (LUMEN) token showed significant gains of 7.4%, potentially due to a partnership announcement with Chainlink (LINK).

Physical gold prices rose to record highs on Friday, trading above $3,200 in Hong Kong following a breach of all-time highs during U.S. trading hours.

The precious metal is set to increase by about 5.5% week-on-week as global investors are turning to the traditional safe haven amid a backdrop of economic uncertainty and geopolitical tensions.

Gold typically rallies during periods of economic or geopolitical uncertainty, recognized as a reliable store of value in volatile market conditions.

While there has been some de-escalation in trade tensions, investors remain apprehensive about unpredictable policy decisions from the White House.

Moreover, gold shares an inverse relationship with interest rates. When rates are lower, the opportunity cost of holding non-yielding gold diminishes, making it a more appealing investment option for investors.

A significant factor contributing to gold’s rally is the mounting concern about the U.S. budget deficit.

As of mid-fiscal year 2025, the deficit has expanded by $1.3 trillion, placing it on track to reach $2.6 trillion annually, or roughly 9% of GDP.

Furthermore, the independence of the Federal Reserve is being questioned. On April 9, U.S. Supreme Court Chief Justice John Roberts reversed a lower court ruling that had temporarily allowed President Trump’s administration to fire members of independent agencies.

This action might enable Trump to remove Fed Chair Jerome Powell, potentially leading to further instability in financial markets.

U.S. inflation data showed some cooling in March, with the Consumer Price Index increasing by 0.1%, putting the 12-month inflation rate at 2.4%, down from 2.8% in February.

Despite this, traders are pricing in three or four interest rate cuts by the end of the year, which could provide additional support for gold prices.

The escalating U.S.-China trade war continues to generate anxiety in the market. The White House confirmed on Thursday that President Trump has raised tariffs on Chinese goods to 145%.

In response, China quickly imposed 84% tariffs on U.S. imports and has been strengthening ties with Europe and Asia to mitigate the economic pressure.

Asian equity markets showed mixed performance in response to these developments. Hong Kong’s Hang Seng decreased by 0.2%, Shanghai’s SSE went up by 0.12%, Taipei’s TAIEX rose by 1.6%, and Tokyo’s Nikkei 225 fell by 3.5%.

Meanwhile, China’s state media has reported that stimulus measures are being planned, including interest rate cuts and government spending of approximately $136 billion.

Among other notable movers in the crypto market, Curve DAO’s CRV token experienced a surge of 18% following news that the U.S. aims to relax rules and enforcement related to Decentralized Finance (DeFi).

Technical analysis suggests that gold prices may continue their upward trend. The 14-day Relative Strength Index is nearing the overbought region at 70, indicating that there may still be potential for further increases before buyers become exhausted.

The immediate resistance level for gold is at $3,250, with the possibility of reaching $3,300 if the momentum persists.