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Gold-Backed PAXG Token Spikes to $2.9K Amid Geopolitical Tensions

Apr 14, 2024
    PAXG spiked as high as $2,923 on Saturday, trading at premium of over 20% to gold’s per ounce price of $2,342.90 on Friday.Bitcoin traded at a perfect negative correlation to PAXG in a sign of weak demand as a geopolitical hedge.
Over the weekend, the cost of PAX Gold (PAXG), a digital currency backed by gold from Paxos, rose significantly due to heightened geopolitical conflicts in the Middle East leading investors to seek out safe-haven assets.
On Saturday, the price of PAXG reached an impressive peak of $2,923 in trading, representing a significant surplus of more than 20% compared to gold’s price of $2,342.90 per ounce, as recorded at the previous New York close. According to CoinDesk’s data, PAXG currently maintains a noticeable premium, with its price standing at $2,471.

During this time, Bitcoin and other significant cryptocurrencies experienced downward pressure as Iran responded with explosives against Israel following suspicions that Israeli forces had targeted its consulate in Syria on April 1. On Sunday, Iran issued a threat of larger reprisals towards both Israel and the United States after Israel declared they would retaliate to Iran’s hostile actions.

Having a market value exceeding $446 million, PAXG ranks as the second largest gold-backed token globally. Tether Gold (XAUT) holds the top spot with a market value of $581.9 million. Over the weekend, PAXG experienced growth but this did not translate to XAUT and other gold tokens. CoinDesk contacted Paxos for comment, awaiting their response at the time of publication.

Over the past month, the price of gold has jumped by more than 8%, contrasting with a 10% drop in bitcoin’s value. Last Friday, Goldman Sachs analysts boosted their end-of-year prediction for gold from $2,300 to $2,700. They explained that the surge in gold’s value has not yet attracted significant investment from institutional investors and retail buyers.

Leading indicator

Over the weekend, several market observers kept a keen eye on PAG’s surge and Bitcoin’s decline. They pondered if these price movements in the continuous cryptocurrency market were an indication of impending downturns in the stock markets on Monday.

“Now, with drones limiting access to other markets during times of conflict, everyone outside of crypto is closely monitoring Bitcoin (BTC) to assess its influence, as it’s currently the most accessible market,” Andy Constan, founder of macroeconomic research firm Damped Spring, explained on X.
Over the weekend, Bob Elliot, a former executive at Bridgewater and current CIO of Unlimited Funds, pointed out that Bitcoin’s strong connection in opposite direction to PAXG slightly weakened its allure as a safe haven against geopolitical risks.
Bitcoin can be described in various ways, but it doesn’t serve as a shield against geopolitical risks. The recent weekend provided more evidence. Bitcoin’s price moved almost oppositely to PAXG, a digital token backed by gold, over the past day. In fact, Bitcoin seems to be an increasingly poor hedge in light of this correlation. (Elliot’s statement on X)

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2024-04-15 04:11