Tokenized gold tokens XAUT and PAXG hold a combined market capitalization of $4.2 billion, yet only $63 million is actively deployed as collateral across major DeFi lending protocols—1.5 percent of their total value, according to a RedStone report.
The limited collateral adoption contrasts with active spot trading. Tokenized gold volume reached $90.7 billion in the first quarter, even as gold futures prices rallied above $5,600 per troy ounce.
Aave v3 processed its largest cluster of XAUT liquidations on March 23 without operational issues, a stress test that followed a sharp 10 percent decline in gold prices over the preceding week. JPMorgan precious metals strategist Greg Shearer described the move as an "extremely brutal flush."
Gold futures have fallen more than 26 percent since their January peak. Expectations of higher U.S. interest rates have weighed on demand for non-yielding assets including precious metals.
The RedStone findings point to an infrastructure gap for tokenized real-world assets as the sector expands. The broader tokenized RWA market reached $43 billion in June, according to Token Terminal. Gold is one component alongside private credit, U.S. Treasurys and equities.
Centralized exchanges are also integrating tokenized assets to bridge traditional finance with digital markets. A CoinGecko report put the "crypto TradFi" market at $6.6 billion by June.
The gap between high spot volumes and low collateral utilization reflects how little tokenized bullion has been pulled into lending pools—limiting its DeFi utility despite its scale.
