While cryptocurrency can certainly be a great investment, it never hurts to diversify your portfolio. Precious metals, and gold in particular, have a very long track record of storing value and can be a good choice in times of uncertainty.
How to buy gold with crypto?
In this article, we’re highlighting the three ways that you can buy gold with crypto and explaining the benefits and disadvantages of each method and what type of investor it’s best suited for.
1. Buy gold-backed crypto tokens
One of the best ways to buy gold with crypto is to buy tokens that are backed with physical gold. Since such tokens can be redeemed for physical gold, they closely track the price of gold and provide almost identical investment results as purchasing gold.
Currently, the most popular gold-backed token on the market is XAUT, which is issued by Tether (the company that’s also behind the immensely popular USDT stablecoin). One XAUT token represents on troy ounce of gold, which is held in a Swiss vault.
Here is a quick list of the best gold-backed crypto tokens on the market today:
The great thing about gold-backed tokens is that you can transact with them just like with any other token, so you can utilize them in various DeFi protocols and easily trade them against other digital assets – physical gold simply doesn’t have that flexibility.
However, compared to owning physical gold, you need to trust that the gold backing the tokens will be stored safely and that redemptions will always be available, which will allow the token’s price to continue tracking the price of gold.
If you’re interested in purchasing tokenized gold, we provide an article which explores the best gold-backed crypto tokens more in-depth.
- Easily accessible through crypto exchanges and DEXes
- Backed by physical gold
- Can be used just like any other blockchain-based tokens
- Require more trust than simply owning physical gold
- Transaction fees can be expensive, depending on the blockchain network the token is issued on
2. Trade CFDs that track the price of gold
If you own crypto and want to buy gold, you can deposit your cryptocurrency to a trading platform that accepts cryptocurrency and lists trading instruments that track the price of gold.
This method of getting exposure to gold is not suitable for long-term investors, but can be useful if you just want to speculate on gold’s price movements in the short term.
There are several online trading platforms that accept crypto deposits and offer various derivatives that track the performance of gold.
For example, PrimeXBT offers a CFD (contract for differences) that allows traders to easily get exposure to the price movements of gold. PrimeXBT gives users the ability to access high leverage, unlocking a variety of trading strategies. In addition, the platform provides a copy trading module, which allows users to automatically follow moves made by more experienced traders.
Trade Gold on PrimeXBT
Another platform that accepts crypto deposits and where you can trade gold CFDs is SimpleFX. Traders on SimpleFX can access leverage of up to 1,000:1. However, the amount of leverage that’s allowed decreases as the user’saccount balance increases. The highest leverage level of 1,000:1 is only permitted for users who have an account balance of $1,000 or below.
Trade Gold on SimpleFX
Alternatively, you could simply deposit crypto to a cryptocurrency exchange that lists a gold-backed token such as XAUT and trade it there. However, you likely won’t be able to access leveraged trading for gold-backed tokens on such exchanges.
- Exposure to the price of gold without the hassle of storing physical gold
- Leverage allows traders to enter larger positions
- Access to features such as demo trading and copy trading
- Not suitable for long-term positions due to overnight fees
- Using too much leverage can result in large losses
3. Buy physical gold from vendors that accept crypto payments
Some gold and precious metals vendors accept Bitcoin and other cryptocurrencies. This can be a good option if you want to pay with cryptocurrency and want actual physical gold rather than a gold-backed token or a trading instrument that tracks the price of gold.
Examples of gold vendors that accept cryptocurrency payments include Bullion Exchanges, JM Bullion and APMEX.
Besides gold, these vendors typically also sell other precious metals such as silver, platinum and palladium. You can find precious metals in various formats such as coins, small bars and large bars (as large as 1 kilo).
- Get actual physical gold instead of a token or derivative
- No trusted third party is required after you receive your gold
- Physical gold can be stolen if not stored securely
- Selling physical gold can be a hassle
The bottom line
If you want to use your cryptocurrency holdings to acquire some golds, there’s quite a few options available on the market. You can buy physical gold from one of the many gold vendors that accept Bitcoin, or invest in gold through digital means, either by purchasing gold-backed crypto tokens or using trading instruments that are tied to the price of gold.
If you want to learn more about the topic of investing in gold, make sure to take a look at our article exploring the value of gold bars.
Source: https://coincodex.com/article/39826/how-to-buy-gold-with-crypto/