Tether, the cryptocurrency sector's largest stablecoin issuer, has become a significant player in the gold market, a development that has surprised market observers in recent months.
According to new analysis from Jefferies, Tether has become the world's largest gold holder when excluding central banks. This revelation has reignited discussions about its potential role in gold's recent surge to all-time highs.
Jefferies: "Tether Raises Gold"
Following gold prices reaching a record high approximately a month ago, many commentators attributed the surge to concerns about "currency depreciation." Others argued it was due to a flight from the dollar and momentum trading. However, according to Jefferies, the explanation may be more straightforward: Tether has been a driving force behind gold's ascent.
Tether's engagement with gold is not a recent phenomenon. Since 2020, the company has been issuing the XAUt token, which is backed by physical gold stored in Swiss vaults. Furthermore, Tether has invested over $300 million in mining and precious metals companies throughout the year. CEO Paolo Ardoino has consistently stated the company's intention to diversify its holdings, describing gold as a "natural bitcoin."
Data published by Jefferies indicates that Tether's reported reserves of 116 tonnes of gold as of the end of September position the company just behind central banks in terms of holdings. This quantity is comparable to the gold reserves held by small- to medium-sized central banks, such as those in South Korea, Hungary, and Greece.
The report further highlights that Tether alone accounted for approximately 2% of global gold demand. This figure is equivalent to 12% of the gold purchases made by central banks on a quarterly basis.
Based on discussions with investors, Jefferies reports that Tether intends to acquire an additional 100 tonnes of gold in 2025. While demand for stablecoins remains robust despite volatility in the cryptocurrency market, Tether possesses the financial capacity to readily fund these acquisitions, aligning with its target of achieving $15 billion in profit this year.
Tether's strategy of accumulating gold appears to conflict with the US Genius Act. This legislation prohibits stablecoin issuers from utilizing gold as a reserve asset. Consequently, Tether's substantial gold holdings cannot be used to provide reserves for its compatible stablecoin, USAT, which is slated for launch by the end of the year.