PAX Gold: Slow, Steady, Generational Wealth in Token Form

Key Points

PAX Gold, which tracks the price of gold on a 1-to-1 basis, offers investors exposure to gold in token form.

Over the past 12 months, PAX Gold is up more than 40%.

For some investors, gold ETFs may be a superior way to get exposure to the price of gold.

• 10 stocks we like better than PAX Gold ›

Gold is typically seen as the ultimate safe-haven asset, which is why everyone seems to be talking about it these days. Amid geopolitical tensions and macroeconomic uncertainty, what better place to put your money than gold?

The newest way to invest in gold is via gold-backed stablecoins. Leading the charge is PAX Gold (CRYPTO: PAXG), which now has a market cap of $2.3 billion. Just like gold, it's up nearly 10% for the year, and is one of the few bright spots in an otherwise dismal crypto market. But is it right for your portfolio?

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What is PAX Gold?

PAX Gold is a gold-backed stablecoin. That means that it is pegged 1-to-1 to the price of gold. That's because each PAX Gold token held on the blockchain is backed by one fine troy ounce of gold held in a London gold vault. Paxos, the issuer of the stablecoin, calls it "the safest way to own investment-grade gold."

What this means in practical terms is that PAX Gold can track the price of gold in perpetuity. That means it has the potential to create slow, steady, generational wealth. Over the past 12 months, gold has been up 43%. Over the past five years, gold has risen 164%. And over the past 20 years, gold is up an incredible 641%.

Of course, there's no guarantee that gold will continue to perform like this over the next 20 years. But what is guaranteed is PAX Gold's ability to track gold prices over this period.

What are the benefits of a gold-backed stablecoin?

Understandably, this might sound a bit like reinventing the wheel. Why would you possibly want to own a gold stablecoin when you can just buy a gold ETF?

If you're only concerned about performance, that's a fair question. Here's a comparison of PAX Gold versus the iShares Gold Trust (NYSEMKT: IAU) over the past 12 months. As you can see, there is almost a perfect correlation between the two.

But there are other factors to keep in mind. For one, when you buy a stablecoin, you don't have to worry about paying the management expenses of the iShares Gold Trust ETF. Second, you can trade the gold stablecoin 24/7, via global crypto markets. You also don't have to worry about storing or securing any physical gold.

Is PAX Gold right for you?

Admittedly, PAX Gold is not as easy to buy as a traditional gold ETF. If you don't have a crypto trading account, you probably won't be able to buy it. However, you can buy PAX Gold if you have an account on either Robinhood Markets or Coinbase Global. On both, it is listed as a tradable asset.

So, if you are thinking about buying gold for the long haul and have a crypto trading account, PAX Gold could be worth a closer look. If the price of gold continues to soar, then PAX Gold is going to go along for the ride.

Should you buy stock in PAX Gold right now?

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Dominic Basulto has no position in any of the stocks mentioned. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.