Tokenized gold market capitalization and trading volumes have expanded dramatically, yet these assets show minimal integration into decentralized finance. Only 1 percent of the combined $4.9 billion market value for Tether Gold (XAUT) and Pax Gold (PAXG) is deployed as collateral on major DeFi lending platforms.
Spot trading volumes for tokenized gold reached $90 billion in the first quarter of 2026, according to the World Gold Council's 2026 Digital Gold Market Report. Yet Kevin Huynh, co-founder and CEO of Xash, argues that volume masks a fundamental problem: most gold-backed tokens sit idle rather than generating yield.
"Buying isn't the same as using," Huynh said. "The better measure of adoption is what holders do with their tokens."
XAUT and PAXG together comprise more than 90 percent of the tokenized gold market, which has grown fivefold since late 2024. The bulk of trading activity reflects investors trading the underlying gold price—a function already available through traditional exchange-traded funds.
Approximately $63 million worth of PAXG and XAUT currently functions as collateral on Aave and Morpho, two prominent DeFi lending protocols. This figure highlights the limited penetration of these assets into decentralized financial applications.
PAXG's circulating supply more than doubled from about 198,000 tokens at the end of November 2024 to approximately 448,000 tokens now. During the same period, gold prices increased over 50 percent, rising from approximately $2,660 per ounce to $4,030. New token issuance accounted for roughly two-thirds of PAXG's market value growth, with rising gold prices contributing the remaining third.
Huynh noted that the sector's expansion stems from genuine investor demand rather than solely the appreciation of the underlying metal. Yet tokenized gold has struggled to establish meaningful utility within DeFi. The limited deployment as collateral suggests holders prefer passive exposure to gold prices rather than active participation in decentralized lending or yield-generating strategies.
