Tokenized Gold in Crypto Markets: Tracking Accuracy and Portfolio Performance

This paper examines the relationship between traditional gold (XAU) and its tokenized counterparts (PAXG and XAUT), providing an empirical assessment of how digital representations of real-world assets align with their underlying benchmarks. Using multi-year time series data, the study evaluates price deviations, tracking accuracy, correlations, and volatility across both weekday-only and 24/7 trading datasets, incorporating weekend effects and crypto-market microstructure. Results show that both tokenized assets exhibit strong long-term alignment with XAU, while short-term divergences arise from continuous crypto trading, liquidity fragmentation, and issuer-specific design features, with XAUT consistently tracking spot gold more closely than PAXG. Building on this analysis, the paper examines the role of tokenized gold within dynamic, smart contract-driven crypto portfolios that also include BTC, ETH, and cash. Portfolio simulations demonstrate that adaptive rebalancing strategies materially improve risk-adjusted performance, with XAUT serving as a stabilizing anchor and cash enabling rapid, automated repositioning during volatility spikes. The findings offer a dual contribution: they clarify the fidelity and market behavior of tokenized gold and provide evidence of its practical utility within automated, on-chain portfolio management, highlighting both its strengths and structural limitations in emerging digital financial systems.