In the dynamic landscape of digital assets, cryptocurrencies backed by gold have experienced a notable underperformance over the past week. This decline coincided with a significant drop in the price of gold, which had previously surged more than 10% this year. The recent downturn is attributed to escalating speculation surrounding former President Donald Trump’s proposal for tariffs, perceived by many as a strategic negotiating tool.
Gold-backed tokens such as Paxos gold (PAXG) and Tether gold (XAUT) have seen a decline of approximately 1% over the week, currently trading around $2,900. In contrast, the wider cryptocurrency market observed a positive trend; the CoinDesk 20 Index recorded a 5.7% increase, while the overall MarketVector Digital Assets 100 Index (MVDA) climbed by 3.4% during the same timeframe.
The price of gold has recently declined amid growing speculation that the tariffs threatened by President Trump are designed as a negotiating tactic. This development has adversely affected the valuation of safe-haven assets, including gold and the U.S. dollar.
Trump’s announcement regarding reciprocal tariffs, intended to mirror those imposed by other nations on U.S. imports, signifies potential protracted negotiations. Analysts predict that this could result in a delay of months for tariff implementations, suggesting that the administration is allowing room for diplomatic discussions with other global players.
Despite this recent dip in gold prices, a report from Morgan Stanley indicates a silver lining for those seeking hedging opportunities amidst increasing global reflation, geopolitical tensions, and intensified fiscal spending. Notably, major Wall Street institutions have recently raised their price forecasts for gold. Such upward revisions are poised to bolster the value of gold-backed digital assets, which derive their worth from bullion held in secure vaults.
Citi strategists have recalibrated their short-term gold price target to $3,000, with an average forecast for the year set at $2,900. Similarly, UBS has significantly upped its 12-month gold target to $3,000 per ounce.
As the interplay between traditional assets and cryptocurrencies continues to evolve, investors remain vigilant, evaluating recent trends and broader economic signals that may influence gold-backed digital assets in the near future.
