The gold market is witnessing significant changes, as central bank buying slows and the interest in gold-backed cryptocurrencies surges. Such cryptocurrencies have recently enjoyed a resurgence, marked by a three-year high in minting volume. This growth highlights the shift in the cryptocurrency market analysis towards tokens backed by precious metals.

Cryptocurrency Market Analysis and Gold-Backed Tokens

Over the last month alone, over $80 million in gold-backed tokens were minted, according to data from rwa.xyz. This increase pushed the sector’s market capitalization up 6% to $1.43 billion. Additionally, the monthly transfer volume rose sharply by 77%, reaching $1.27 billion, signaling a renewed interest in digital gold assets.

This trend aligns with a broader pattern in the physical gold market. The World Gold Council’s latest report reveals overall gold demand in the first quarter of the year was 1,206 tonnes—a 1% increase compared to last year and the strongest first quarter since 2016. Despite a slowdown in central bank purchases to 244 tonnes from the previous quarter’s 365 tonnes, demand for gold remained robust.

Gold ETFs have played a crucial role in this shift. Investment demand has skyrocketed to 552 tonnes, echoing the historical trend of central banks turning to gold for stability.

These inflows were instrumental in driving the average quarterly gold price to a record $2,860 per ounce, marking a 38% increase from the previous year. However, following a 23.5% year-to-date rise, the gold price dipped 2.35% last week while cryptocurrencies and other risk assets appreciated. Currently, spot gold trades at $3,240.

Traditional gold demand avenues, like jewelry, experienced a decline, hitting lows similar to those during the pandemic. Nevertheless, bar and coin demand, especially in China, remained strong.

For further reading, visit: Tokenized Gold Surges Above $2B Market Cap as Tariff Fears Spark Safe Haven Trade

At Bakara Invest, our analysis suggests that the increasing interest in gold-backed cryptocurrencies may signify a long-term shift towards digital assets as a preferred investment strategy.

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