Over the weekend, the price of PAX Gold (PAXG), a digital asset backed by gold and created by Paxos, experienced a significant increase. This surge was attributed to escalating geopolitical tensions in the Middle East, prompting a higher demand for safe-haven assets.
PAXG reached a peak of $2,923 on Saturday, trading at a premium of more than 20% compared to the price of gold, which stood at $2,342.90 per ounce at the close of trading in New York on Friday, according to data from CoinDesk. As of the time of writing, PAXG still maintained a notable premium, trading at $2,471.
In contrast, bitcoin and other major cryptocurrencies faced downward pressure as Iran launched attacks on Israel in response to a suspected Israeli strike on its consulate in Syria on April 1. Iran issued warnings of further retaliation against Israel and the United States, leading to increased tension.
With a market capitalization exceeding $446 million, PAXG ranks as the world’s second-largest tokenized gold coin, trailing only tether gold (XAUT), which boasts a market capitalization of $581.9 million.
Despite PAXG’s weekend surge, this increase did not extend to XAUT or other gold-backed tokens. CoinDesk reached out to Paxos for comment but had not received a response by the time of publication.
Gold has seen an 8% surge over the past four weeks, while bitcoin has experienced a 10% decline. Goldman Sachs analysts raised their year-end price forecast for gold from $2,300 to $2,700 on Friday, citing momentum and the absence of significant investment from retail investors in the gold market.
Many traditional market participants closely monitored PAXG’s rise and bitcoin’s decline over the weekend, speculating whether the risk-averse behavior observed in the 24/7 crypto market would spill over into stock markets on Monday.
Andy Constan, founder of macroeconomic research firm Damped Spring, noted that observers outside the cryptocurrency sphere were now paying attention to bitcoin to gauge the market’s response to geopolitical tensions, as it is the only market open when such events occur.
Former Bridgewater Executive and CIO of Unlimited Funds, Bob Elliot, remarked on the perfect negative correlation between bitcoin and PAXG over the weekend, suggesting that this undermined bitcoin’s perceived role as a hedge against geopolitical risks.
“Bitcoin may serve various purposes, but it does not function effectively as a geopolitical hedge. This weekend’s trading activity provides further evidence. Bitcoin exhibited a near-perfect negative correlation with PAXG, a gold-backed token. If anything, bitcoin’s effectiveness as a hedge seems to be diminishing over time,” Elliot commented.
