How is the gold market really doing? The hidden risks behind the price boom

The gold market is experiencing a moment of euphoria. In the last twelve months, the price of the precious metal has experienced a growth of more than 80%, making it one of the most profitable assets of the moment. However, this apparent prosperity hides a systemic risk that few investors realize: most of those who believe they own physical gold actually have only a debt certificate.

According to Björn Schmidtke, CEO of Aurelion (Tether’s gold treasury firm), approximately 98% of gold exposure in global markets exists solely as debt recognitions (IOUs), not tangible physical assets. This discovery raises uncomfortable questions about the soundness of gold investments that we consider safe.

The Gold Boom: Real or Illusory Prosperity?

The most common way to invest in gold is to acquire what Schmidtke refers to as “paper gold”: exchange-traded funds (ETFs) nominally backed by physical gold. Investors buy these stocks believing they own a real gold bar, when in fact they have acquired a debt recognition that promises them access to the metal, but with no clear guarantees about which specific bar belongs to them.

“What investors really own is a small piece of paper that says ‘I owe you gold.’ People collectively agree that this role has value, but that is the whole basis of the system,” explains Schmidtke in conversations with specialized media. This mechanism has worked smoothly for decades, because investors rarely demand physical delivery of the metal. However, this convenience has created a financial time bomb.

The problem of “proof of ownership” in gold investments

The real danger arises when we imagine a severe financial crisis scenario. If fiat currency suffers a catastrophic devaluation and millions of investors simultaneously demand the physical delivery of their gold, the system would collapse.

Schmidtke describes the scenario as a “seismic event”: tens of billions of dollars in physical gold cannot move in a matter of hours. In addition, since investors do not possess specific ownership documents on which bullion belongs to them (they only hold shares of one ETF), it would create an insurmountable logistical bottleneck. Under such circumstances, the price of actual physical gold would skyrocket while “paper gold” prices would remain lagging, leaving derivatives holders locked in trades they can’t settle.

This phenomenon has already occurred in related markets. “We’ve seen this happen in the silver market,” Schmidtke warns. “If such an event occurs, we will see it in the gold market as well.”

Gold tokenization: A viable solution?

The answer Aurelion proposes is revolutionary: transforming gold into blockchain-based tokens. The concept is elegant. While paper gold requires delivering physical metal (which is logistically impossible on a large scale), digitized gold tokens like XAUT decouple ownership from physical movement.

Each XAUT token is inextricably linked to a specific gold bar stored in secured Swiss vaults. The “deed of ownership” of that gold can be transferred globally in a matter of seconds through the blockchain, while the physical bar remains secure in the vault.

This model solves a fundamental problem: proof of ownership. Unlike the ETF system, where the investor does not know which specific bar he owns, with XAUT there is a clear and verifiable allocation. When it comes time to redeem, the investor can be confident that their property is documented, traceable, and secure, regardless of whether physical delivery takes time.

“How you own gold matters just as much as whether you actually own it,” says Schmidtke, summarizing the philosophy behind this innovation.

Aurelion’s Strategy: The Future of Gold On-Chain

Aurelion has made a clear commitment in this direction. The firm has restructured its treasury to hold XAUT, a fully redeemable token backed by physical gold deposited in maximum-security Swiss institutions. Currently, the company holds approximately 33,318 XAUT tokens, representing a valuation of around $153 million at the current price of approximately $5.31 per token.

The strategy is not speculative in the short term. According to Schmidtke, the firm would maintain its gold position unless market conditions present a significant and sustained discount to its underlying holdings. The stated goal is to build a lasting wealth of gold on blockchain that investors from across the industry can participate in for years to come.

Aurelion also plans to expand its gold treasury through capital raising over the next few months, a sign of its conviction in the future of tokenized assets.

Gold as a digital cornerstone

The thesis that Aurelion defends aligns with a broader vision: gold and bitcoin are not competitors but complements. Both represent assets of long-term value in a world where trust in traditional financial institutions is periodically questioned.

As tokenized gold slowly scales from the initial stages of adoption, its existence raises a crucial question for investors: how important is it to really know exactly what they own when they invest in gold? Aurelion’s answer is clear: it absolutely matters. In a world where assets increasingly exist in digital spaces, proof of ownership via blockchain represents not only security, but also radical transparency.

For investors who have watched the gold boom with caution, blockchain-based solutions offer an alternative that combines the security of the precious metal with the speed and verifiability of modern technology.