Gold has risen sharply, and the currency circle is " indispensable"

The price of gold has hit a new high again.

Since late August, gold prices have entered a new round of crazy rise mode and have continued to hit new all-time highs. As of press time, COMEX gold once stood at $4,392 per ounce on October 17, once again hitting a record high, with a cumulative increase of 10% in the last six trading days. Moreover, in less than two months from August 20 to October 16, the price range of gold rose by an astonishing 30%.  

Figure: COMEX gold futures price and the total market capitalization of Tether gold tokens and PAXG coins

Source: wind, DefiLlama, 36Kr

A core judgment  in our " perspective" article  " The Fed' s interest rate cut boots land, the global gambling moment for gold prices is coming"   is that gold prices will definitely rise when the Fed cuts interest rates. With the announcement of interest rate cuts by the Federal Reserve on September 17, local time, the price of gold rose in response, and the above judgment has been fulfilled. In addition, the article also points out that the continuous expansion of gold stablecoins will provide long-term support for gold prices, and the long-term positive relationship between gold prices and the scale of gold stablecoins also confirms the above logic.

So, what is the internal logic of the recent new high and the soaring total market value of gold stablecoins? Where do the other core momentum driving the upward trend of gold prices come from?

Gold is " currency circle"

An important reason why gold has continued to hit new highs this year is that the market has sufficient expectations for the expansion of gold stablecoins.

Currently, there is a strong demand for stablecoins in the capital market. From the perspective of transaction volume, the market widely recognizes that the data of two calibers come from Sister Wood' s ARK Invest and Deutsche Bank: ARK invest' s report shows that the total transaction volume of stablecoins in the world in 2024 will be as high as $15.6 trillion, while Deutsche Bank data shows that in 2024, the total global stablecoin transaction volume will reach $27.6 trillion, even exceeding the combined trading volume of Visa and Mastercard.

Driven by strong demand, the scale of stablecoins is expanding rapidly. As of mid-June this year, the total market value of global stablecoins has exceeded $250 billion and the mainstream market expectation can be said to be very explosive, that is, by 2035, the global stablecoin market size will be no less than $4 trillion, with a corresponding CAGR of 32% The current U.S. government expects the stablecoin market size to reach $3.7 trillion by early 2030, with a corresponding CAGR of up to 80%

From the perspective of stablecoin currencies,  the main anchors of stablecoins are the US dollar and US bonds, and the scale of gold stablecoins is still very small。 As of July this year, the market capitalization of PAXG coin and Tether gold token, the largest and second largest gold stablecoins, was only $900 million and $800 million, while the total market capitalization of USDT and USDC was as high as $161 billion and $64 billion during the same period. It can be seen that  whether it is the current scale or long-term market expectations, gold stablecoins still have huge room for improvement.

From the perspective of asset allocation, the core logic of the market' s expectation of gold stablecoins to continue to expand lies in the fact that compared with other stablecoins,  the core advantages of gold stablecoins stem from their anchor - gold, which has two major attributes: scarcity and anti-inflation.

The above two attributes of gold are not only conducive to maintaining the long-term stability of the value of gold stablecoins, but also provide customers of gold stablecoins with certain anti-systemic risk functions. Especially at some moments when it is necessary to release safe-haven demand, the value of gold stablecoins themselves is stable, and the expansion of gold stablecoins drives the rise in gold prices, which together constitute a double insurance for hedging.  

Chart: The total market capitalization of major global stablecoins (unit: $1 billion As of July 2025)

Source:  DefiLlama, 36Kr

For gold prices, as the demand for gold stablecoin trading continues to grow, its market size will continue to expand Due to the fact that stablecoins are anchored to assets in a fixed proportion, the trend of continuous expansion of gold stablecoins will become one of the important forces supporting the long-term rise of gold prices in the future.

Taking Tether, the world' s largest stablecoin issuer, as an example, the scale of Tether gold tokens issued by it has grown quite rapidly, with a total market value of about $800 million in July this year, and has grown to about $1.6 billion by October 16, doubling in a short period of time. More noteworthy, Tether said in the middle of this year that it has established its own independent vault in Switzerland to store about $8 billion worth of gold reserves, and plans to expand gold reserves in the future.

In the future, as the entire stablecoin market moves towards a trillion-dollar scale, Tether, as an industry leader, and the Tether gold token issued by it will also enjoy the dividends of first-mover advantage. Considering the 1:1 peg relationship between Tether gold tokens and physical gold,  Tether' s gold reserves will be a key factor limiting the size of its gold stablecoins, and this logic applies to other gold stablecoin varieties as well.

Therefore, in the context of the long-term boom in the gold stablecoin track, stablecoin issuers such as Tether are also motivated to expand their gold reserves to cope with the rapid expansion of gold stablecoins. At present, there are rumors in the market that Tether buys 2 tons of physical gold per week, which is equivalent to the monthly gold reserves purchased by our country' s central bank.

Looking at gold prices in recent years, major central banks around the world have continued to buy gold in large quantities, making supply and demand gradually become the core factor affecting gold prices.  Now, stablecoin issuers have joined the ranks of gold purchases, further strengthening the pricing logic of supply and demand affecting gold prices.

Optimistic about the long-term strength of gold prices

Regarding the recent surge in gold prices, especially on October 17, which hit a new all-time high intraday, one of the important short-term factors is that the bad debts disclosed by Zions and Western Alliance, two regional banks in the United States, have caused investors to worry, leading to a sharp decline in U.S. bank stocks. In addition to this short-term factor, it can be said that all factors are quite favorable to gold.

From the perspective of the current pricing logic of gold, the future of gold prices, in terms of supply and demand, the central bank' s willingness to buy gold is still strong and quite sustainable, superimposed on the continuous purchase of gold by stablecoin issuers in order to expand the scale of gold stablecoins,  two important long-term gold purchase forces provide stable support for the long-term strength of gold prices。

The core logic of the central bank' s active and significant increase in gold is still to avoid risks. At the macro level, geopolitical conflicts and trade frictions have occurred frequently in recent years, which have continued to impact the global credit system At the same time, the scale of U.S. bonds is high, the dollar credit is being torn apart, and there are potential systemic risks to the dollar system.

Looking back at history, gold prices are usually negatively correlated with the credit of the US dollar, and  each round of continuous weakening of US dollar credit will usher in a historic market for gold。 Looking at a key event that has recently damaged the credit of the US dollar, that is, the Federal Reserve cut interest rates in September, the market generally believes that Powell was coerced to make a " cowardly interest rate cut" . As the Fed' s independence is further damaged, the revaluation of US dollar credit has further increased the allocation value of gold.

On the other hand, the Fed has now entered a cycle of interest rate cuts, also based on the historical law of negative correlation between gold prices and the US dollar, and the easing expectations brought about by interest rate cuts resonate with the core pricing logic of strong demand driving gold prices. From a long-term perspective,  the continuity of the interest rate cut cycle will provide sustained and stable support for the upward trend of gold  prices.

From the perspective of funds, as the valuation of the overseas technology sector represented by artificial intelligence hits a high level, a scenario that may appear in the market is: the technology sector has peaked and adjusted, and the market safe-haven demand has gradually spread from the geographical end to the trading side, and the safe-haven asset attributes of gold itself, coupled with the outstanding long-term allocation value, are expected to attract some capital inflows, thereby promoting the price of gold to usher in a new round of over-rising market.  

Figure: Nasdaq Technology Market Cap Weighted Index valuation Source: wind, 36Kr

In terms of margin of safety, although many institutions such as the Shanghai Gold Exchange, Shanghai Futures Exchange, Industrial and Commercial Bank of China, and China Construction Bank have issued risk warnings for the continuous rise in gold, the latest view of the World Gold Council says that from a strategic point of view, the overall position of gold is still low, and the speculative positions and net long positions in the futures market have not yet reached the historical peak, indicating that the market is not yet saturated, and gold still has continued attractiveness. *Disclaimer:
The content of this article only represents the author' s opinion.
The market is risky, and investment needs to be cautious. In no event shall the information in this article or the opinions expressed constitute investment advice to any person. Before deciding to invest, it is important for investors to consult a professional and make prudent decisions if necessary. We do not intend to provide underwriting services or any services that require a specific qualification or licence to be performed by the parties to the transaction.