Gold-pegged tokens: You can now invest in gold through these crypto coins

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Gold-pegged tokens: You can now invest in gold through these crypto coinsGold is considered a safe haven investment option helping counter shocks such as wars or market crashes. However, investing in physical gold comes with challenges such as storage, transportation, and liquidity.

This has led to the rise of multiple alternatives such as gold sovereign bonds, exchange-traded funds (ETFs), futures contracts among others.The latest addition to these gold-related investments is the gold-pegged crypto token. Tag along as we explain what these tokens are and how they work.What are gold-pegged tokens?All pegged tokens are derivatives of an underlying asset.

For example, the USDT is a blockchain-based cryptocurrency pegged to the US dollar and therefore follows its price movements. It is a ‘stablecoin’ with the fifth-largest market capitalisation in the world.Also Read: Explained | All you need to know about crypto ETFsSimilarly, a gold-pegged token is a derivative cryptocurrency pegged to the price of gold.This allows investors to gain exposure to gold and trade the token without the pressure of maintaining close custody.

These tokens also eliminate other ancillary hassles such as transportation, asset transfer, and liquidity issues. These are similar to ETFs and derive their value from gold futures as well as Contract for Differences (CFDs).Futures are contracts to buy/sell an asset at a predetermined price at a specified time in the future.On the other hand, CFDs are contracts that obligate sellers to pay the difference between the contract value of the asset and its current value at a given time in the future.Also Read: What is TATA Coin, is the rally sustainable, and should you invest?Both these derivatives enable