The recent weakness of gold reflects dollar financing pressures in the short term and not a change in its main factors, as the structural demand coming from the diversification of sovereign reserves remains solid, while new channels like tokenization expand the global reach of the metal and its long-term demand base.
The recent drop in gold is a petrodollar financing event, in which agents seek more dollar liquidity to meet the inelastic demand for energy and debt obligations. The traditional relationship between the metal and real interest rates may still pressure the price, although this link has weakened since 2022.
The main factor for gold in recent years has been the diversification of reserves and protection against devaluation, driven by sovereign demand and insensitive to rates. The recent short-term liquidation does not alter this thesis.
Tokenized gold represents a new source of demand, with a distribution channel capable of reaching over 5 billion people in emerging markets who seek alternatives to preserve value.
Two channels, one shock
Gold has suffered a significant decline since the war between the United States and Iran caused a spike in oil prices, almost wiping out the gains accumulated for the year. Two channels explain the movement, both originating from the oil shock.
Higher real rates
The real rate is obtained by subtracting inflation expectations from the nominal yield of bonds, and it has been the main anchoring factor for gold in the long term.
The nominal yield of the 10-year U.S. Treasury bond (US10Y) has been rising since early March, from 3.96% to 4.39%, due to the worsening conflicts in the Middle East, which raised energy prices and renewed inflation concerns. Likewise, the implied inflation rate for 10 years rose from 2.25% to 2.38% during this period, leading the 10-year TIPS (indicator of the real interest rate) from 1.70% to 2.00%. Gold does not generate income, and when the risk-free rate rises, the opportunity cost of holding the metal increases, stimulating capital reallocation. This mechanism occurs in all cycles.
However, the correlation has weakened since 2022. Gold continued to appreciate even with rising real interest rates between 2022 and 2025, supported by significant purchases from central banks, interest as geopolitical protection, and persistent fiscal deficits in the United States.
Petrodollar financing restriction
Although the long-term inverse relationship between gold and real interest rates still maintains some influence, it has significantly weakened since 2022. This indicates that a second channel also weighs heavily on the current decline of gold: the global tightening for dollars.
Oil-importing economies, such as China, India, Europe, Japan, and South Korea, together buy about 70% of the world's crude oil. With prices rising over 40% in oil prices, the dollar cost for the same energy volume has increased significantly. These nations need to secure many more dollars against export revenues and cash flows that change slowly. The demand shock for dollars is structurally inelastic: energy imports cannot be delayed, and most cross-border debts are in dollars with fixed schedules, which continue to require timely payments.
This scenario generates a temporary scarcity of dollars, visible in the rising dollar index.
This process goes beyond nations. Companies and families also need more cash flow to cope with rising energy costs, resorting to the liquidation of assets as an immediate solution. Liquid assets, such as gold and stocks, are traded to quickly raise dollars. The high liquidity and broad international acceptance of gold make the metal the primary source for rapid resource acquisition, causing waves of selling.
Rapid rise of tokenized gold
The current liquidation is the result of a liquidity event, not a re-evaluation of fundamentals. Even if real interest rates remain high, the two fundamental drivers of gold — protection against sovereign devaluation and reserve diversification — are insensitive to rates. Central banks around the world buy gold to reduce exposure to the dollar, with little concern for the yield of 10-year TIPS. Many investors acquire gold to protect against currency devaluation and as a store of value, ignoring short-term price fluctuations.
Now, there is a new factor. The demand for gold as a store of value has always been limited by distribution barriers. Physical metal requires custody, logistics, and, in the case of ETFs, a brokerage account and banking access — which a large part of the global population does not have. Thus, potential participation in gold is restricted by access infrastructure.
Tokenized gold eliminates such barriers. Anyone with a mobile phone can access backed physical gold, without the need for a bank account, brokerage, or logistical custody. The total supply of tokenized gold has been growing rapidly since the end of 2025. Although it still represents less than 40 tons against the global stock of 216,265 metric tons, according to the World Gold Council (2025), the pace of expansion deserves attention. In the last six months, the total supply of this segment has doubled.
Tether Gold (XAUT) and Paxo Gold (PAXG) together account for over 95% of the market. The duopoly highlights a structural entry barrier. Launching digital gold products requires issuers to independently develop custody, comply with compliance standards, audit, and redemption structure.
Recently, the largest global industry association, the World Gold Council, reported that it is creating a shared infrastructure to make gold products digital — interoperable, scalable, and easy to implement. The proposed system consists of three layers. A physical layer would concentrate on the supply, storage, transportation, and redemption of gold. A digital layer would be responsible for issuance, ownership registration, and management of the product lifecycle. Finally, an interface would allow issuers to develop user experiences based on this common structure. In this setup, competition occurs in experience, price, and distribution, not in custody infrastructure.
Sizing the market potential
To estimate the market potential of tokenized gold, it is possible to use the gold ETF market as a reference. The global gold ETF reached 4,025 tons by the end of 2025, while tokenized gold today represents about 37 tons, less than 1% of the size of ETFs. However, the growth rate is much faster: in just the second half of 2025, the supply of tokenized gold grew by more than 100%.
As tokenized gold targets new channels, such as retail users in emerging markets, and not just the replacement of existing ETFs, the gross growth of tokens results in additional demand for physical gold.
If the tokenized gold market maintains an annual growth rate between 80% and 100%, the accumulated net physical demand could exceed 240 tons in the next five years, reaching 7% of the current gold ETF market. Under a more conservative hypothesis of 50% expansion per year, the additional demand would be between 100 and 140 tons.
The WGC infrastructure initiative adds to this scenario, as the growth observed so far has occurred entirely among just two issuers. A successful implementation of shared digital infrastructure could further expand the potential market, favoring a more optimistic estimate.
Summary
The recent weakness of gold is related to an event of seeking financing via petrodollar, where agents seek more liquidity in dollars to meet inelastic energy demand and debt obligations. The traditional relationship between gold and real interest rates may still exert pressure on the price, although this link has weakened significantly since 2022.
The main factor driving demand for gold in recent years has been the diversification of reserves and protection against devaluation, led by governments and with little relation to interest rates. The recent correction does not alter this scenario.
Tokenized gold creates a new source of demand by opening a distribution channel capable of reaching over 5 billion people in emerging economies who demand reserve assets.
Legal disclaimer: the information provided here does not constitute investment, financial, commercial, or any other type of advice and should not be treated as such. All the following content is for informational purposes only.
The article BloFin Research: gold under pressure as a new catalyst may drive increase was first seen on BeInCrypto Brazil.