Why gold still matters

Gold is making headlines again in 2025, hitting new all-time highs driven by a surge in safe-haven demand.

Author: 0xEdwardyw

Gold is making headlines again in 2025, hitting new all-time highs as safe-haven demand soars.

Its price breached the $3,000 mark for the first time, marking a significant recovery for the ‘king of precious metals.’ As concerns over fiat currency debasement and global instability grow, investors are returning to gold.

Often regarded as "digital gold," Bitcoin has also seen a surge in interest, leading many to question the relevance of physical gold.

However, the latest data from ChainShot reveals a compelling case for gold in its traditional form.

In the first quarter of 2025, gold's annual return rate reached 36%, outperforming major stock indices and Bitcoin.

Lower volatility than Bitcoin

Compared to Bitcoin's wide price swings, gold's price movements are much more moderate.

For instance, in 2024, Bitcoin's annual volatility is about 47%, while gold's is only 12%. This means that on average, Bitcoin's price volatility can be nearly four times that of gold. For investors who prioritize risk control, this difference is crucial.

As we've seen early this year, while tech stocks (NASDAQ) fell nearly 15% in a few weeks, gold was essentially flat (up about 1%), and Bitcoin fell about 20%, moving almost in sync with the stock market.

Gold's low volatility makes it a valuable asset for capital preservation during market turmoil, while Bitcoin is more like a high-beta risk asset.

Gold's low correlation with other assets

In the recent market cycle, the trend of gold and Bitcoin has diverged. In the past year, gold has steadily risen to new highs driven by inflation concerns and war tensions, while Bitcoin has fluctuated in a wider range, and its trend is more affected by investors' risk appetite.

It's worth noting that gold has a low correlation with traditional assets, or even negative, which is ideal for diversification in asset allocation.

In fact, gold and Bitcoin also show a negative correlation, which means that holding both at the same time can further enhance the diversification of the portfolio.

Tokenized Gold in 2025

One of the most interesting developments is that gold itself has joined the blockchain revolution. So-called "tokenized gold," digital tokens that are 100% backed by physical gold, are experiencing rapid growth.

In March 2025, the market capitalization of gold-backed crypto tokens hit an all-time high of $1.4 billion. This track is dominated by two tokens: PAX Gold (PAXG) and Tether Gold (XAUt). These tokens allow investors to hold gold in digital form, combining the stability of gold with the flexibility of crypto assets.

PAXG (Paxos Gold)

PAX Gold (PAXG) is issued by Paxos Trust Company, a regulated financial institution headquartered in New York. Each PAXG token represents one ounce of refined gold stored in a London Bullion Market Association (LBMA) certified vault.

Importantly, Paxos operates under strict regulation - the token is fully backed 1:1 by physical gold and is subject to monthly audits by a third party to verify its reserves. Paxos is authorized by the New York State Department of Financial Services (NYDFS), so it is highly compliant and provides full confidence for holders.

PAXG's popularity has steadily increased in 2025. Its current market capitalization is about $680 million, accounting for about half of the tokenized gold market. PAXG's daily trading volume often reaches tens of millions of dollars. It benefits from regulatory trust, and Paxos Gold remains stable even after the United States' scrutiny on stablecoins has intensified.

New PAXG trading products are also emerging: for example, at the end of 2024, the derivatives exchange Deribit launched futures and options contracts for PAXG, marking the rising interest of institutional investors in tokenized gold as a trading asset.

XAUt (Tether Gold)

Tether Gold (XAUt) is another major gold-backed token, issued by TG Commodities, a company associated with Tether. Each XAUt represents one ounce of gold stored in Swiss vaults that meet the London Good Delivery standard.

As of 2025, the market value of XAUt is approximately $770 million.

However, XAUt's regulatory framework is different from PAXG. In 2023, Tether moved its gold token business to El Salvador.

As of March 2025, the market capitalization of gold-backed crypto tokens hit a record high of $1.4 billion, driven by the surging price of gold and increasing demand for safe-haven assets.

Among them, two major gold-backed tokens,