Tokenized gold has had a busy year and a quiet one at the same time. Spot trading volume reached $90.7 billion in the first quarter as gold futures rallied above $5,600 per troy ounce, but only about $63 million of the roughly $4.2 billion in circulation is being used inside decentralized finance, according to a new report from oracle provider RedStone.
That is 1.5% of the market doing anything beyond sitting in a wallet.
Trading Volume Soars, Collateral Use Lags
The $63 million figure covers Tether Gold (XAUT) and PAX Gold (PAXG) pledged as collateral on the lending protocols Aave v3 and Morpho, RedStone said. Set against the two tokens’ combined $4.2 billion market capitalisation, it is a utilisation rate of 1.5%.
The report frames that as the sector’s next hurdle, arguing that deeper integration with lending protocols is what tokenized gold needs to unlock real utility.
RedStone’s position in that argument is worth naming. The company is an oracle provider, supplying the price feeds that lending protocols use to value collateral and decide when to liquidate a position. More tokenized assets deployed in more lending markets means more demand for exactly what RedStone sells. The underlying data is useful and the conclusion is not neutral.
Aave Processed Largest XAUT Liquidation Cluster Without Disruption
The report’s most concrete finding concerns a real stress event. On 23 March, Aave processed its largest cluster of XAUT liquidations without disruption during a sharp sell-off in gold, which RedStone presents as evidence that tokenized bullion can function reliably as collateral under acute pressure.
The liquidations followed a 10% fall in gold over the previous week, its worst weekly performance in more than four decades. JPMorgan precious metals strategist Greg Shearer described the sell-off as an ‘extremely brutal flush.’
It is worth being precise about what passed the test. The protocols did. A liquidation cluster clearing smoothly means the price feeds held, the liquidation mechanics fired, and lenders were made whole. For the borrowers on the other side of those liquidations, the same event means their collateral was sold into one of the worst weeks gold has had since the 1980s. Infrastructure working as designed and users having a good outcome are different measurements, and only the first one was tested here.
Since peaking in January, gold futures have fallen more than 26%, pressured by expectations of higher US interest rates, which reduce demand for non-yielding assets including precious metals.
Why 1.5% May Not Be a Failure
RedStone reads the low utilisation as an infrastructure problem waiting to be solved. There is a simpler explanation that the report does not reach for.
People buy gold to sit still. It is the asset investors reach for when they want something that does not move, does not depend on a counterparty and does not need managing. Posting it as collateral to borrow against is the opposite instinct. It converts a defensive holding into a leveraged position with a liquidation price attached, and the March event is a reminder of what that means when the metal falls hard.
On that reading, 1.5% is not a gap in the plumbing. It is most tokenized gold holders wanting the thing they bought to behave like gold. The $90.7 billion in spot volume shows plenty of appetite for trading it. What is missing is appetite for borrowing against it, and those are different demands that better lending integration would not necessarily close.
The Wider Tokenized Market
Gold sits within a rapidly expanding tokenized real-world asset market that also includes private credit and US Treasuries, with equities growing in significance. In June, Token Terminal reported that the broader tokenized RWA sector had topped $43 billion in total value.
Centralised crypto exchanges are also moving to embrace tokenized assets as a bridge between traditional finance and digital markets. A recent CoinGecko report found that the emerging ‘crypto TradFi’ market had grown to $6.6 billion as of June.
Against those figures, tokenized gold at $4.2 billion is a meaningful slice of a still-small sector, and the $63 million actually deployed in lending is a rounding error within it.
