What is Tether Gold (XAUt)? A Simple Guide to the Gold-Backed Crypto Coin

Tether Gold (XAUt) is not just another cryptocurrency. It’s a digital token that gives you ownership of real, physical gold-no vault, no shipping, no storage fees. Each XAUt token equals exactly one troy ounce (31.1 grams) of gold, stored in secure Swiss vaults. Unlike Bitcoin or Ethereum, XAUt doesn’t speculate on price swings. It moves with the price of gold, but with the speed and accessibility of blockchain tech.

How XAUt Works: Digital Gold, Real Backing

Every XAUt token is backed by a specific gold bar. These aren’t just any bars-they meet the London Good Delivery (LGD) standard, meaning they’re 99.5% pure and certified by the LBMA. Tether keeps these bars in vaults operated by Brink’s and other trusted Swiss custodians. When you buy XAUt, you’re not buying a promise-you’re buying a claim on real gold with a serial number you can trace.

The system works like this: when you purchase 1 XAUt, Tether allocates one ounce of gold to your address. When you sell or transfer it, that same ounce moves to the new owner’s address. There’s no pooling or fractional lending. Tether’s monthly audits confirm that every token has matching gold in the vaults. As of October 2025, over 246,000 XAUt tokens are in circulation, each representing a full ounce of physical gold.

Why Choose XAUt Over Physical Gold or ETFs?

Buying a gold bar from a dealer means paying for delivery, insurance, and storage-often 0.5% to 1% per year. With XAUt, you skip all that. You can trade it 24/7 on crypto exchanges, unlike traditional gold markets that close on weekends and holidays. You can own a fraction of an ounce-down to 0.000001 XAUt-making it accessible even if you only have $50 to invest.

Compare it to gold ETFs like GLD. Those charge annual fees of 0.40%. XAUt has no recurring fees. But here’s the catch: if you want to cash out, you pay a redemption fee of 0.45%-0.50%. And if you want actual gold bars delivered, you need at least 430 XAUt (about $700,000 worth at current prices). For most people, that’s not practical. But for trading or holding, it’s a clean alternative.

How XAUt Compares to Other Gold Tokens

Tether Gold isn’t the only gold-backed token. Paxos Gold (PAXG) is its closest rival. Both are 1:1 backed, both use Ethereum, and both require audits. But PAXG has a smaller market cap-around $320 million compared to XAUt’s $825 million. That means XAUt is more liquid and easier to trade in large amounts.

Then there’s Kinesis Gold (KAU), which runs on its own blockchain. That means lower fees and faster transactions, but less integration with DeFi apps. XAUt works with wallets like MetaMask and platforms like Uniswap, making it easier to use in crypto loans, yield farms, or as collateral.

But XAUt’s biggest weakness? Ethereum. If the network gets congested, your transaction can fail-or cost you $15 in gas fees. In 2023, about 12% of users reported failed redemptions due to network issues. Tether is working on Layer 2 solutions to fix this, with a rollout expected in early 2025.

How to Buy and Use XAUt

You can’t buy XAUt with a credit card on Coinbase or Binance. You need to use a crypto exchange that supports ERC-20 tokens. Popular options include Kraken, Bitfinex, and Gate.io. You’ll need ETH in your wallet to pay for gas fees when you buy or transfer XAUt.

Here’s the step-by-step:

1. Get an Ethereum wallet like MetaMask or Trust Wallet.
2. Buy ETH on a fiat-to-crypto exchange like Kraken or Coinbase.
3. Transfer ETH to your wallet.
4. Go to a DEX like Uniswap or a centralized exchange that lists XAUt.
5. Swap ETH for XAUt. Confirm the transaction and wait for it to clear.

Beginners often get tripped up by gas fees. A simple transfer might cost $2-$5. During peak times, it can spike to $15. Always keep at least $10 in ETH just for transactions.

Redeeming XAUt for Physical Gold

If you want actual gold, you can redeem your tokens. But it’s not simple. You need to pass strict KYC checks: government ID, proof of address, and sometimes a notarized form. Tether requires a minimum of 430 XAUt for physical delivery. That’s over $700,000 in gold value. Most people won’t do this.

For smaller amounts, you can redeem for cash. But again, you pay the 0.45%-0.50% fee. Processing takes 10-14 business days. Users on Reddit and Trustpilot report slow support-some wait over 72 hours for replies. One user lost $1,200 in failed transactions due to Ethereum congestion during a redemption attempt.

Regulation and Risks

Tether Gold operates in a gray zone. The EU’s MiCA rules classify it as a tokenized asset and require full backing verification. That’s good. The U.S. has no clear rules yet. The FCA in the UK warned in October 2023 that gold-backed tokens lack sufficient oversight.

The biggest risk isn’t the gold-it’s Tether. If Tether’s audits stop, or if the vaults get compromised, XAUt loses its value. Critics say it’s centralized. Supporters say it’s the most practical way to own gold digitally. Dr. David Gerard, a blockchain expert, calls it "democratizing gold ownership," but warns: "Your gold is only as safe as Tether’s integrity."

As of 2025, Tether has added vaults in Singapore and Canada to reduce delivery delays. They’re also integrating with Ethereum’s Layer 2 networks to cut gas fees by 90%. If that works, XAUt could become the go-to for retail investors looking for stable, tangible value in crypto.

Is XAUt Right for You?

Buy XAUt if:

• You want exposure to gold without storing physical bars
• You trade crypto and want a stable asset to hedge against volatility
• You’re comfortable with Ethereum’s fees and delays
• You don’t plan to redeem for physical gold

Avoid XAUt if:

• You want to hold physical gold and have it delivered
• You’re in the U.S. and worried about regulatory uncertainty
• You can’t afford to lose money on failed transactions due to network congestion
• You prefer fully decentralized options

For most people, XAUt is a smart way to hold gold in a digital portfolio. It’s not perfect. But it’s the closest thing we have to owning gold like you own Bitcoin-fast, global, and fractional.