Gold Investment: Why 98% of Investors Don't Actually Own the Gold Bar

The gold market is experiencing a moment of extraordinary enthusiasm. Over the past 12 months, the price of the precious metal has increased by over 80%, securing its position as one of the best-performing assets. However, behind this apparent solidity lies a structural vulnerability that directly concerns those who choose to invest in gold through traditional channels. According to Björn Schmidtke, CEO of Aurelion, the problem lies in the fact that the vast majority of investors who believe they own physical gold actually hold only paper documents promising delivery of this precious metal.

The Paper Gold Trap: Hidden Risks in the Traditional System

The simplest way to access the gold market remains purchasing shares in exchange-traded funds, commonly known as gold ETFs. When an investor proceeds with this operation, they firmly believe they own a tangible gold bar. In reality, according to Schmidtke, they only acquire “a piece of paper that reads: ‘I owe you gold.’ And people collectively agree that this piece of paper has value.” Although this approach avoids the logistical hassle of physically storing the metal, it is precisely here that the most significant issues emerge.

Schmidtke estimates that 98% of global gold exposure is actually allocated in IOU instruments. In these mechanisms, billions of dollars remain tied to promises of delivery, without investors having any certainty about which bars they actually own. As long as the system functions without interruptions, this setup is acceptable, since few investors ever request physical delivery. But what would happen if circumstances changed radically?

When Paper Meets Reality: The Collapse Scenario

Imagine a scenario where a global currency crisis prompts investors to simultaneously demand the delivery of their physical gold. In that case, an apparently insurmountable logistical obstacle arises: “You can’t just move a few billion dollars worth of physical gold in a single day,” emphasizes Schmidtke. But the critical issue is even deeper. If gold bars do not have a definitive ownership trace, delivery times would be further extended, creating a bottleneck that could paralyze the market.

In such circumstances, the price of physical gold could skyrocket while paper gold prices remain stagnant. Holders of these derivatives would be unable to settle their debts, causing a fracture in the system. Schmidtke does not consider this scenario merely theoretical: “The risk is real. We’ve already seen it in the silver market,” referring to moments when physical premiums spiked while spot prices remained stable. “We believe we will see it also in the gold market,” if a similar event occurs.

Tether Gold and Blockchain: Ownership Becomes Traceable

The solution emerges from integrating blockchain technology. Schmidtke argues that tokenized gold, such as Tether Gold (XAUT), solves the delivery problem by separating ownership from the physical movement of the metal. Each XAUT token represents a specific gold bar, stored in Swiss vaults and inseparably linked to its owner via blockchain.

The advantage is substantial: the “ownership certificate” of gold can be transferred globally in seconds through the blockchain network, while the metal remains physically immobile. Unlike paper gold, where investors are unaware of which bar they actually own, with XAUT each allocation is searchable and traceable. If a critical situation forced investors to redeem their shares, they would at least know exactly which gold is being delivered to them and when. At the current price of about $5.56 per XAUT token, this form of gold investment offers the speed of digital transactions without sacrificing regulation and physical custody.

Sustained Investment and Compound Growth: Aurelion’s Vision

Aurelion’s strategy embodies this innovative vision. The company has completely reallocated its treasury to hold XAUT, positioning itself as a practical example of adopting this ownership model. Currently, the company holds 33,318 XAUT tokens, equivalent to about $153 million, demonstrating a strong commitment to long-term accumulation.

Schmidtke clarifies that this is not a short-term speculative arbitrage strategy. “It’s about building a solid wealth of Tether Gold that investors can participate in over time,” states the CEO. The company also plans to raise additional capital during the coming year to further expand its holdings of tokenized gold. The sale of its gold would only occur if market conditions presented a “significant and sustained discount” relative to the underlying asset value, an event Schmidtke considers unlikely given the growth prospects of the gold market.

This vision reflects a fundamental consideration: how you own gold matters just as much as actually possessing it. For gold investors, understanding the difference between paper and genuine assets becomes crucial in evaluating their investment portfolio.