Tether's Big Gold Moves — Why it's Buying, What's Next

Key Concepts

• Gold Price Surge: Gold reaching all-time highs beyond $4,000 per ounce.
• Tether: A stablecoin issuer, primarily known for USDT, a US dollar-pegged stablecoin.
• Tether Gold Token: A digital token representing ownership of physical gold.
• Elemental Royalty (formerly Elemental Altus Royalties): A company in which Tether acquired a significant stake.
• USDT Reserves: The backing assets for Tether's USDT stablecoin.
• Genius Act: US legislation signed into law in July that restricts stablecoin issuers from using gold as a reserve asset.
• Tokenized Gold: Digital representations of gold ownership.
• Non-traditional Mining Investors: Investors outside the typical mining sector, such as cryptocurrency entities.

Gold Price Drivers and Tether's Emerging Role

The video discusses the recent surge in gold prices, reaching all-time highs exceeding $4,000 per ounce. While familiar factors like strong central bank buying, geopolitical tensions, interest rate cuts, and de-dollarization have been contributing to this rise, a new factor has emerged: purchases from Tether.

Understanding Tether and its Gold Initiatives

Tether is a stablecoin issuer, most recognized for USDT, a stablecoin pegged to the US dollar. They also offer other stablecoins and a digital token, Tether Gold, where one token represents ownership of one ounce of gold. Tether launched its gold token in 2020.

A significant development occurred in the summer when Tether acquired a stake of over 30% in Elemental Royalty (formerly Elemental Altus Royalties). This move was framed as part of Tether's strategy to incorporate long-term stable assets like gold and Bitcoin into its ecosystem. At the time of this acquisition, Tether reported holding over 100,000 Bitcoin and close to 80 metric tons of gold, in addition to its Tether Gold tokens.

Matt Guyger of MJG Capital Fund commented on this acquisition, noting that Tether, a major cryptocurrency player, taking a controlling stake (eventually over 50%) in Elemental Altus was significant. He suggested that this move, by a company with no prior business in hard assets or natural resources, could signal a return of non-traditional mining investors to the space after a decade-long absence, as these investors previously favored the US stock market or cryptocurrencies. Guyger believes that in hindsight, Tether's move might prove to be quite significant.

Tether's Growing Gold Holdings and Market Impact

Recent reports from Jefferies analysts indicate that Tether accounted for nearly 2% of total gold demand in the third quarter of the year, surpassing even top central bank buyers. Jefferies also states that Tether now holds a total of 116 metric tons of gold, making it the largest non-central bank holder of gold. Of this amount, 12 metric tons back Tether's gold token, while the remaining 104 metric tons are reportedly held as part of USDT's reserves.

This situation presents a potential conflict with the Genius Act, signed into US law in July, which prohibits stablecoin issuers from using gold as a reserve asset.

Future Plans and Regulatory Considerations

Jefferies suggests that Tether plans to purchase approximately 100 metric tons of gold in 2025 and make further investments in the gold sector. Beyond its stake in Elemental Royalty, Tether has also invested in Gold Royalty, Metalla Royalty and Streaming, and Versameat Royalties.

Tether's substantial gold purchases are likely contributing to price support for the metal this year and highlight increasing interest from mainstream entities. However, the video emphasizes that Tether is currently one of several drivers for gold prices, not the sole determinant.

Key Areas to Monitor

1. Genius Act Implementation: The practical application and enforcement of the Genius Act will be crucial. Tether is reportedly planning to launch USAT, a new US-focused stablecoin by the end of the year, which will comply with the Act and will not use gold as a reserve asset.
2. Investor Appetite for Tokenized Gold: The demand for tokenized gold is expected to grow, especially as gold prices continue to rise. While tokenized options may attract new investors due to convenience, the preference for physical metal remains strong for many.

Conclusion

Tether's significant recent activity in the gold market, including substantial purchases and strategic investments, is undeniable and likely providing price support. This trend underscores a broader growing interest in gold from non-traditional entities. However, it is important to view Tether's influence as one factor among many driving the gold market. Future developments, particularly concerning the implementation of the Genius Act and the evolving landscape of tokenized gold, will be key to watch. The video concludes by inviting viewer opinions on Tether's role in the gold market.