Tether, the world's largest stablecoin issuer, slightly reduced its gold reserves in the third quarter of 2026, ending a streak of consecutive quarterly increases.
According to a research report released by Jefferies on November 3, Tether's disclosed gold holdings as of September 30, 2026 totaled approximately 165 tonnes (about US$21.9 billion), a decrease of roughly 3 tonnes from about 168 tonnes at the end of the second quarter 鈥?the first quarter-over-quarter decline in recent memory. The reduction came entirely from a contraction in gold held within USDT reserves, while the gold reserves backing XAU鈩?remained unchanged.
Regarding Tether's third-quarter reduction, Jefferies noted that given the scale of its existing holdings, changes in Tether's buying activity could have a significant impact on the gold market.
Notably, USDT supply was essentially flat in the third quarter (approximately US$184.5 billion), meaning the reduction was not driven by a decline in stablecoin issuance. At the same time, Tether's holdings of Bitcoin and other investment assets increased by period-end, though the disclosure did not clarify whether gold was directly converted into those assets.
Meanwhile, Jefferies analysts believe that Tether's overall role in the physical gold market remains unchanged, and a single quarter of modest reduction is not sufficient to conclude that its long-term accumulation intentions have shifted.
Position Size: From 90 Tonnes to 165 Tonnes, Tether Is Now a Major Gold Market Player
Tether's demand for physical gold comes from three channels: first, reserve gold backing USDT; second, reserve gold backing the gold token XAU鈩? third, balance-sheet gold investments purchased with interest income. Currently, public data covers only the first two, meaning the visible 165 tonnes represents only a lower bound of its physical gold holdings.
Looking at its historical growth trajectory, Tether's gold holdings grew from approximately 90 tonnes in June 2025 to 165 tonnes in under a year and a half, an increase of nearly 83%. Specifically, as of September 30, 2026, gold in USDT reserves was worth approximately US$19.1 billion, equivalent to about 143 tonnes, down roughly 3 tonnes from the previous quarter; gold in XAU鈩?reserves was worth approximately US$2.9 billion, equivalent to about 22 tonnes, flat compared with the previous quarter.
According to the Jefferies report, when comparing Tether's gold purchases with those of central banks, Tether's (USDT and XAU鈩?combined) year-to-date net gold purchases of approximately 27 tonnes exceed those of the Czech Republic but trail Poland (122 tonnes), China (103 tonnes), Uzbekistan (55 tonnes) and Kazakhstan (41 tonnes), giving it a place among the world's major gold buyers.
Reduction Context: USDT Supply Steady, Funds May Be Flowing to Bitcoin and Other Assets
The third-quarter gold reduction occurred against a backdrop of essentially unchanged USDT supply, differing from the logic of previous quarters in which "stablecoin expansion drove gold reserve increases." USDT supply rose only slightly from approximately US$184.2 billion at the end of the second quarter to approximately US$184.5 billion at the end of the third quarter, an almost negligible change.
At the same time, Tether's holdings of Bitcoin and other investment-type assets rose by period-end. The Jefferies report noted that the disclosure documents did not explicitly state whether the decrease in gold reserves was directly linked to the increase in those assets, but the overlap in timing has drawn market attention to Tether's internal asset reallocation.
Nevertheless, the rise in gold prices during the third quarter partially offset the impact of lower holdings. The book value of gold in USDT reserves rose from approximately US$18.8 billion in the previous quarter to approximately US$19.1 billion, achieving a "lower volume, higher value" outcome.
XAU鈩?Expansion Sees No New Demand, Tokenized Gold Market Cap Reaches US$5.2 Billion
On the tokenized gold business front, the supply of Tether's gold token XAU鈩?remained unchanged at 707,747 tokens in the third quarter, corresponding to approximately 22 tonnes of physical gold with a market value of about US$2.9 billion. Another major tokenized gold product, Pax Gold (PAXG), is issued by Paxos Trust Company. Both represent ownership of one troy ounce of specific gold bars stored in Swiss vaults, with prices linked to spot gold.
According to the Jefferies report, as of September 30, 2026, the combined market capitalization of XAU鈩?and PAXG rose to approximately US$5.2 billion, up about 21% quarter-over-quarter and about 100% year-over-year, though it pulled back after October 31.
In September of this year, Tether announced a partnership with Shiga to launch self-custodial financial products supporting XAU鈩? USDT and Bitcoin in Africa and the Gulf Cooperation Council (GCC) region, aimed at expanding distribution channels for tokenized gold. However, based on third-quarter data, this partnership has not yet translated into visible incremental demand for physical gold, with XAU鈩?supply flat quarter-over-quarter.
Structural Logic Unchanged: CEO Reaffirms 10%-15% Portfolio Allocation to Gold
Jefferies analysts explicitly stated in the report that they do not believe a single quarter of modest reduction represents a shift in Tether's overall gold allocation strategy. Since June 2025, Tether's disclosed gold holdings have grown substantially, while the expansion of XAU鈩?related business continues to broaden its potential market.
On a strategic level, Tether CEO Paolo Ardoino previously stated publicly that he plans to allocate 10%-15% of the investment portfolio to physical gold, and that this gold is independent from the reserve gold backing USDT and XAU鈩? To date, the company has not disclosed any adjustment to that strategy.
The Jefferies report concludes that stablecoin reserve allocation and tokenized gold remain emerging sources of institutional physical gold demand, and Tether's gold purchases are expected to fluctuate quarter by quarter, but its role as a significant participant in the gold market will persist.
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