From USDT to Gold Bars: Tether Becomes a Non-Central Bank Force Shaking the Gold Market.

Over the past year, Tether Holdings SA has quietly emerged as one of the most important players in the global gold market - a significant intersection between the crypto world and the gold world. The world's largest stablecoin company has now become one of the largest known physical gold holders globally, apart from banks and sovereign countries. Little is known about Tether's internal operations and its gold strategy. Last year, when two of the most senior gold traders left the leading gold market player HSBC HOLDINGS, the industry speculated on their whereabouts, but few would have guessed it would be Tether. Tether's CEO Paolo Ardoino described the company's role in the gold market as "similar to a central bank" in an interview, predicting that America's geopolitical rivals would introduce a gold-backed, dollar-replacement plan. He revealed that the company plans to continue investing substantial profits into gold, while also competing with banks in the metal trading field. He said, "We will soon become one of the largest 'gold central banks' in the world." According to estimates, in the past year, Tether has rapidly increased its purchasing power, accumulating over 70 tons of gold for its reserves and its own gold-backed stablecoins. This scale surpasses the official gold purchases of nearly all individual central banks - only Poland's 102 tons exceeds it. At the same time, this purchase volume also exceeds all gold ETFs outside the top three, which represent the collective actions of thousands of investors. Ardoino stated that Tether currently holds approximately 140 tons of gold, most of which are in their reserves, with a portion used to back their gold-backed stablecoins. This batch of gold is valued at about $24 billion, making it the largest gold reserve outside of known central banks, ETFs, and commercial bank vaults that support major trading hubs. The proportion of gold in Tether's reserves continues to rise. Ardoino mentioned that Tether's current gold purchasing rate is about one to two tons per week and plans to maintain this pace "at least in the coming months." He added, "Of course, decisions will be made based on market conditions, but I believe we will continue in this direction." When asked if there would be a reduction in gold purchases at some point, Ardoino replied, "Maybe, we don't know yet. We will evaluate the demand for gold on a quarterly basis." Currently, Tether's profits mainly come from its US dollar stablecoin USDT - with a circulation size reaching $186 billion. The company exchanges USDT for real dollars and invests these funds in US Treasury bonds and gold assets, generating billions in interest and trading income. Ardoino stated that holding physical gold is crucial, so much so that the company took an unusual step - storing gold themselves, depositing it in a former nuclear bunker in Switzerland, guarded by multiple layers of thick steel doors. He said, "That place is like scenes from a James Bond movie, it's crazy." Due to the highly secretive nature of the gold market, it is very difficult to accurately identify specific buyers, despite being able to describe macroeconomic drivers of investment. Given the large scale of gold purchases disclosed by Tether, some market observers believe that their actions have affected the global gold price trend. Analysts at Jefferies pointed out in a report that Tether's gold purchases may have driven a 65% increase in gold prices last year, calling them "important new buyers" who "may bring sustained gold demand." However, Tether is just a small part of the broader trend of gold buying. Central banks and ETF investors worldwide have purchased over 1500 tons of gold. John Reed, Chief Strategist of the World Gold Council, stated that Tether's buying did have an impact on prices but was only part of the reason for the significant rise in gold prices, stating, "They are a part of this rise, but not the whole." "The best gold trading hall in the world" Ardoino is not satisfied with simply buying gold; he also wants Tether to participate in gold trading - effectively competing with major banks like JPMorgan Chase and HSBC that dominate the market. He stated that the company needs to create "the best gold trading platform in the world" to ensure stable long-term gold acquisition and capture potential market inefficiencies. He added that they are still researching the market, and any trading strategy will ensure that the company remains "extremely bullish on physical gold." "Our goal is to establish a stable, long-term channel for gold acquisition." Another ambition of Tether is that the company has poached two senior gold traders from HSBC to help manage its precious metals business. Ardoino stated that Tether is exploring active trading of the gold it holds, including capturing arbitrage opportunities when there are significant deviations between futures and spot prices. Buying around $1 billion worth of physical gold each month is already a huge logistical challenge. Ardoino explained that Tether buys gold directly from Swiss refineries and through the world's largest financial institutions, with large orders often taking months to be delivered. He said the company is studying how to improve the efficiency of the gold purchasing process, saying, "Because one to two tons per week is a very large quantity." Tether's interest is not limited to gold bars. Their bullish stance on gold has also led the company to invest in gold royalty companies - companies that specialize in buying income streams from gold mines. Tether has invested in almost all medium-sized Canadian listed gold royalty companies, including Elemental Royalty Corp, Metalla Royalty & Streaming Ltd, Versamet Royalties Corp, and Gold Royalty Corp. Gold vs. Dollar In many ways, Tether's attitude towards gold is similar to central banks. Like central banks, they value the liquidity of gold and its status as a reserve asset that is "not anyone's debt." Ardoino previously stated in an interview that gold is "logically safer than any national currency" and "every central bank in the BRICS countries is buying gold." He also stated this week that Tether is used by USD stablecoin users in emerging markets who "love gold, use gold for long-term hedging against their government's currency devaluation," stating, "We believe the world is heading into darkness, and turmoil is escalating." On Wednesday, gold prices rose by over 1.5%, marking the eighth consecutive trading day of gains and hitting a new historical high. Earlier, US President Trump stated that he "does not mind" the recent weakening of the US dollar, pushing the dollar to its lowest level since 2022. However, buying gold also comes with risks. Any move to reduce USD asset allocation could lead to losses, threatening Tether's ability to maintain USDT's peg to 1 USD. In November last year, S&P Global Ratings downgraded the stability rating of USDT to "slightly weak," stating that the assessment "reflected the increase in high-risk assets exposure in USDT reserves over the past year," including bitcoin, gold, secured loans, and corporate bonds, as well as limited disclosure issues. So far, Tether's gold bets have been hugely successful. Their gold purchases coincided with the most vigorous rally in the gold market since the 1970s, with investors and governments worldwide concerned about USD assets. Tether is trying to capitalize on this trend further through another product - Tether Gold (XAUT), a token that is redeemable for physical gold. The company has issued XAUT equivalent to about 16 tons of gold, worth $2.7 billion, and has introduced smaller denomination tokens like Scudo. Ardoino suggested that the market circulation size of XAUT by the end of this year is "very likely" to reach $5 billion to $10 billion. If this is indeed the case, Tether may need to purchase over a ton of gold weekly just to support XAUT, not including the amount needed for their reserves. Although the size of XAUT and other gold tokens is still much smaller than the over $500 billion gold ETF market, Ardoino believes their time is coming. He said, "In my view, some countries are buying a lot of gold, and we believe these countries will soon introduce tokenized gold as a form of currency that can compete with the dollar." Whether a gold-backed USD alternative will eventually emerge, Tether's actions have accurately captured the current sentiment of the times. The World Gold Council's Reed commented, "One of the major players in the crypto world sees gold as 'the original trade-off against the devaluation of the dollar,' which is really interesting."