PAX Gold (PAXG) is a digital asset that represents ownership of physical gold stored in insured vaults. Each PAXG token is backed by one troy ounce of gold held in London vaults and is issued on the Ethereum blockchain as an ERC-20 token. This means you can buy, sell, and transfer gold-backed tokens quickly while retaining a transparent linkage to real-world gold reserves. The gold reserves are audited and stored by custodian partners, with periodic attestations to ensure that the token's supply remains fully collateralized. PAXG combines the stability and value of gold with the flexibility and programmability of blockchain assets.

How does the price of PAXG relate to the spot price of gold?

PAXG is designed to track the real-time price of gold. Each token is redeemable for one troy ounce of gold, so its market price should closely follow the spot price of gold on major exchanges, minus minimal fees or spreads. Price movement can briefly diverge due to liquidity, trading depth, or exchange-specific factors, but long-term parity with gold’s price is the core objective. Investors often compare PAXG to gold ETFs and physical gold to gauge relative performance and liquidity.

What are the benefits of using PAXG over holding physical gold or other gold-backed tokens?

PAXG offers several practical advantages: 1) Liquidity and ease of transfer: PAXG can be traded quickly on crypto exchanges with low settlement times compared to transporting physical bars. 2) Storage and security: Gold is stored in insured, audited vaults, reducing the need for personal storage logistics. 3) Programmability: Being on Ethereum, PAXG supports smart contract integrations, enabling DeFi use cases or automated vault attestations. 4) Transparency: Each token is backed by verifiable gold reserves with periodic audits. However, consider counterparty risk of the custodian and platform-specific fees when comparing to physical ownership.

How can I buy, store, and redeem PAXG securely?

To acquire PAXG, you typically use a crypto exchange or broker that lists the token; you’ll need an Ethereum-compatible wallet (e.g., MetaMask) to receive the tokens. Storage should be in a wallet you control with private keys or a hardware wallet for enhanced security. Redemption involves exchanging PAXG for physical gold through the issuing custodian or authorized partners, which usually requires meeting verification and logistics arrangements. Always verify contract addresses and use reputable platforms. Be mindful of gas fees on Ethereum for transfers and redemption, and understand any custody or redemption fees charged by the issuer.

What risks should I consider before investing in PAXG?

Key risks include counterparty risk (the custodian and issuer’s ability to back tokens with physical gold), regulatory changes affecting stablecoins and tokenized assets, and smart contract or exchange security risks. Additionally, liquidity risk can arise if trading on a particular platform has low volume, leading to wider bid-ask spreads. While PAXG aims to maintain a 1:1 peg to gold, market forces and practical redemption constraints can cause deviations. Finally, consider tax implications in your jurisdiction, as gold-tokenized assets may be treated differently from physical precious metals.

Frequently Asked Questions About Lending PAX Gold (PAXG) in the UK