When investors rushed into gold as a safe-haven asset, they might not have anticipated that one of the key drivers behind this year's record-high gold prices would be Tether, the controversial stablecoin issuer from the cryptocurrency world. This digital asset giant has been buying gold in quantities surpassing central banks, reshaping the supply-demand dynamics of traditional safe-haven assets.
As of September 30, Tether, the issuer of the world's largest stablecoin USDT, held 116 metric tons of gold worth approximately $14 billion, making it the largest single gold holder outside major central banks. Its holdings rival the official reserves of countries like South Korea, Hungary, or Greece. In the third quarter alone, Tether purchased around 26 tons of gold, accounting for 2% of global gold demand during that period and 12% of known central bank purchases.
This revelation sheds light on the hidden force behind gold's 56% surge in 2025. Gold prices rose in two waves this year, gaining about $2,000 in total. The second wave coincided with Tether's accelerated gold purchases. Jefferies noted that Tether's demand "likely tightened supply and influenced market sentiment in the short term, driving speculative inflows."
However, this deep intertwining of cryptocurrency and traditional safe-haven assets raises concerns. If stablecoin demand suddenly reverses, the gold reserves backing their value could face selling pressure. Investors who bought gold to hedge against debt or tech bubbles must now consider whether gold itself has become a bubble in this process.
**Crypto Giant Emerges as a New Force in Gold Markets**
Tether's influence in the gold market has grown significantly this year. Jefferies' data shows that over two quarters ending September 30, the digital asset company's gold purchases exceeded those of official central banks.
Gold's rally occurred in two phases: the first saw a $1,000 rise in four months through April, aligning with tariff shocks and a 10% dollar decline; the second added another $1,000 from mid-August to mid-October, despite no further dollar weakness. While central banks remained the largest buyers (purchasing around 220 tons in Q2 and Q3), Tether's role as a marginal buyer became more pronounced.
In Q2, Tether's purchases accounted for about 14% of central bank buying; by Q3, this rose to 12%. Jefferies highlighted that the timing of the second rally closely matched Tether's accelerated gold accumulation. The firm expects this demand to persist—Tether plans to buy roughly 100 tons of physical gold in 2025.
Given Tether's projected $15 billion profit this year and stablecoins' resilience amid recent crypto volatility, this target appears achievable.
**Dual-Token Strategy and Reserve Allocation**
Tether's gold purchases support two distinct tokens, complicating its motives. By Q3-end, its $174 billion USDT stablecoin reserves included 104 tons of gold, while another 12 tons backed the gold-pegged token Tether Gold (XAUt). Each XAUt represents one ounce of gold, and blockchain data shows XAUt issuance grew by over 275,000 ounces since early August—equivalent to a $1.1 billion gold reserve increase.
This strategy, however, clashes with U.S. regulations. The GENIUS Act, passed in July, established a regulatory framework for stablecoins and explicitly banned compliant issuers from using gold as reserve assets. Tether has announced plans to launch a new compliant stablecoin, USAT, which will abandon gold reserves entirely.
This raises questions: Why did Tether increase USDT's gold reserves post-legislation? With gold prices down over 6% from October's all-time high of $4,379, Tether's buying seems more focused on long-term positioning.
**Speculative Risks in Safe-Haven Assets**
While gold and crypto share ideological overlap—both appeal to concerns about fiat debasement—their practical behaviors diverge sharply. Both are touted as "stores of value" due to limited supply, but cryptocurrencies like Bitcoin remain highly volatile and speculative. This fall, even as currency anxieties shifted to the yen, Bitcoin plunged about a third in six weeks alongside tech-stock selloffs.
Stablecoins differ—their value hinges on full collateralization and redeemability. Yet crypto's cyclical stress persists. If stablecoin demand reverses abruptly, pressure would inevitably spill into backing assets, now including substantial gold reserves.
Jefferies expects stablecoins to generate more gold demand, but others warn crypto's volatility may have injected speculative tides into "safe-haven" gold.
**Tokenized Gold: Ambition vs. Reality**
Tether's gold enthusiasm appears at odds with regulatory constraints but may reflect a long-term bet on tokenized physical gold. For retail investors, holding physical gold is cumbersome—costly to insure and store, futures involve rollover costs, and ETFs carry fees and settlement risks. Tokenization promises 24/7 trading, instant settlement, and zero fees or minimums.
Yet demand remains tepid. Tether is one of only two issuers with over $1 billion in tokenized gold, and its bridge token Alloy, launched a year ago, faded quickly. XAUt issuance mirrors USDT's "bulk-minting" pattern, doubling in six months but remaining negligible against the $60 billion daily physical gold market.
For CEO Paolo Ardoino—a vocal dollar bear—the grand vision might be a gold-backed, non-fiat crypto exchange system. Until then, Tether must convince risk-averse investors that buying blockchain tokens from a Salvadoran-registered private firm—claiming 100+ tons of unaudited bars in undisclosed Swiss vaults—is the best way to hedge currency debasement fears.