XAUt News: Tether's weekly purchase of 1 ton of gold mimics central bank strategies, challenging dollar dominance

Tether is hiring two of the world’s most senior precious metals traders from HSBC, leveraging its substantial financial strength to build a massive gold reserve. Bloomberg’s calculations show that over the course of September, the company added more than one ton of gold weekly on average. Tether Gold (XAUt), with a circulation value of approximately $2 billion, is backed by about 1,300 bars of gold—fully supported—and mimics central bank strategies to challenge dollar dominance.

Tether Poaches HSBC Heavyweights to Build Gold Trading Team

According to sources, Vincent Domien, HSBC’s Global Metals Trading Head, and Mathew O’Neill, Head of Precious Metals Procurement for Europe, Middle East, and Africa, are set to join this cryptocurrency company in the coming months. The sources added that both are currently serving their notice periods at HSBC and requested anonymity because the information has not been publicly announced. This news about XAUt has caused a stir in the precious metals trading community, as both Domien and O’Neill are top industry experts.

Domien is a current board member of the London Bullion Market Association (LBMA), which is the actual standard-setting body for the global gold market. LBMA is responsible for establishing trading rules, certifying refiners, and setting quality standards, making it one of the most authoritative institutions in the gold market. Being a director at LBMA is a role reserved for industry veterans with decades of experience and high reputation. Domien joined HSBC from Société Générale in 2019 and became Global Metals Trading Head in 2022.

O’Neill has worked at HSBC since 2008, with over 17 years of experience in precious metals procurement. He oversees procurement in Europe, Middle East, and Africa, covering most of the world’s gold trading volume. His addition will provide Tether with deep supply chain resources and market relationships.

Their departure is undoubtedly a blow to HSBC’s precious metals business, especially amid fierce talent competition. This year, as gold prices hit new highs and are expected to deliver the best annual performance since 1979, major trading firms, hedge funds, and banks are actively expanding their precious metals teams. HSBC declined to comment, but industry insiders generally see this talent loss as a significant setback for the bank.

In recent years, Tether has actively expanded its precious metals business, holding reserves of over $180 billion, including one of the largest gold reserves outside of banks and governments worldwide. HSBC is a giant in the precious metals sector, widely regarded as the second-largest player after JPMorgan, with activities spanning futures trading, vault custody, and global gold bar transportation. Tether poaching key executives from such a giant demonstrates its ambitious stance in the precious metals market.

Weekly 1 Ton of Gold, Tether Becomes One of the Largest Buyers Globally

(Source: Paolo Ardoino)

According to Tether’s latest reserve report, the company held over $12 billion worth of precious metals in September, some of which support its flagship USD stablecoin. Bloomberg’s calculations show that this company, headquartered in El Salvador, added over one ton of gold weekly on average during the year ending in September. This XAUt news is astonishing because one ton of gold at current prices is worth about $70 million. Weekly purchases imply an annual buy of over 50 tons, totaling roughly $3.6 billion.

This makes Tether one of the largest gold buyers in the market, not including the gold backing its gold-pegged stablecoin and any private investments made with billions of dollars in profits. The company also invests in other parts of the gold supply chain, including licensing companies. This vertical integration strategy shows Tether is not just a passive holder of gold but an active participant in the gold industry’s value chain.

Three Main Components of Tether’s Gold Reserves

USDT Reserve Gold: Part of the stablecoin reserve assets, providing stability and inflation hedge

XAUt Collateralized Gold: About 1,300 bars of gold, fully backing $2 billion in Tether Gold circulation

Strategic Investment Gold: Private investments purchased with company profits, including stakes in mining and licensing companies

Tether’s stablecoin USDT is pegged 1:1 to the US dollar, with reserves mainly composed of US government bonds and other assets like gold. The company also issues Tether Gold (XAUt), which, according to Tether’s website, has a circulation value of about $2 billion and is fully supported by approximately 1,300 gold bars. XAUt is a tokenized asset linked to physical gold, with each token representing one troy ounce of LBMA-certified gold, giving holders ownership rights and the ability to redeem physical gold.

Last year, Tether achieved a profit of $13 billion from its reserve assets, comparable to the largest Wall Street investment banks, despite having a small operational team. This year, profit is expected to reach around $15 billion. Such profitability is rare in fintech, as Tether primarily earns interest margins by holding low-risk assets (US Treasuries) and high-value assets (gold), with very low operating costs.

Tether’s Gold Strategy Echoes Central Bank De-dollarization Trends

This year’s rapid rise in gold prices has benefited the company significantly. Gold prices have increased due to continuous central bank purchases, momentum buying, and what is called “devaluation trades.” A “devaluation trade” broadly refers to investors selling currencies due to fears that sovereign debt and their denominated currencies will depreciate over time. This trend has profound implications in the XAUt news, revealing a structural shift in the global financial system.

As countries reduce reliance on the dollar, Tether appears to be adopting a similar strategy in the private sector. In 2024, central banks purchased over 1,000 tons of gold— the second-highest annual total ever. Most of these purchases come from emerging economies seeking to hedge against dollar-related volatility. Tether’s increased gold holdings reflect this trend. The company’s shift indicates it views gold as a strategic hedge, capable of countering fiat currency fluctuations and regulatory pressures.

Unlike Circle’s USDC, which mainly holds short-term US Treasuries, Tether’s gold reserves mark a move away from dependence on the dollar. This divergence also highlights broader differences in stablecoin reserve philosophies: profit generation versus long-term security. USDC’s strategy emphasizes liquidity and regulatory compliance, with nearly all reserves in US Treasuries and bank deposits. Tether, on the other hand, employs a more diversified approach, including gold, Bitcoin, and other strategic assets.

Tether’s accumulating gold reserves could alter perceptions of stablecoins, transforming them from digital cash to private reserve assets. In fact, Tether’s behavior resembles that of a sovereign wealth fund more than a payment processor. This strategic repositioning is highly significant in the XAUt news, as it indicates private entities challenging state monopoly over reserve management.

As the global monetary landscape shifts, USDT issuer Tether is deepening its investment in physical gold. This move reflects a trend among central banks to diversify funds away from the dollar into gold. It signals that stablecoins are evolving into private reserve management tools holding real assets. Tether’s transformation could inspire other stablecoin issuers to adopt similar strategies, accelerating the integration of digital and physical assets.

Transparency Challenges and Regulatory Scrutiny

Tether’s holdings of physical assets also introduce new logistical and security challenges. Managing physical assets within a tokenized framework requires strict custody, auditing, and cybersecurity measures. With the addition of HSBC veterans, the company seems focused on building its institutional backbone. A professional gold trading team will help Tether establish more robust procurement, storage, and risk management systems.

However, transparency remains a concern. Critics argue that without frequent independent audits or comprehensive reserve disclosures, Tether’s gold strategy could face the same scrutiny as its stablecoin reserves. Historically, Tether has faced questions over reserve transparency, though it has improved disclosures recently (quarterly reports). Still, it has not achieved full audit standards.

Verifying gold reserves is more complex than verifying government bonds. Bonds can be verified through electronic records held by custodial banks, but physical gold requires on-site inspections, authenticity testing, and ownership verification. If Tether truly holds over $12 billion worth of gold (around 1,600 tons), this gold must be stored securely in vaults and periodically audited by independent third parties. Investors have the right to request detailed proof of gold holdings, including vault locations, custodians, and audit reports.

Overall, this signals a new era where private entities hold diversified, multi-asset reserves comparable to central banks. This privatized reserve management model is rare historically, and its success or failure could have profound implications for the global financial system. If Tether can demonstrate that private entities can professionally and responsibly manage large-scale gold reserves, it may open a new paradigm in financial management.