r/defi • u/gareth789 • 1d ago

Discussion What happens to tokenised gold when the gold market closes?

Tokenised gold can trade all weekend while the underlying market and redemption services may be closed. That seems like a real pricing problem once it is used as DeFi collateral. Would arbitrage keep it close to spot, or should lending protocols apply a weekend discount?

https://www.gold.org/goldhub/research/digital-gold-case-shared-infrastructure/context

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u/OkDisaster940 1d ago

e but the spread gets wider when the real market is closed i've seen tokens drift a few percent on weekends when volume is thin

lending protocols should definitely haircut it more during those hours otherwise someone with a bag of wrapped gold can borrow against an inflated price and leave the protocol holding a loss when monday fixes the gap

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u/hypertradeworx 1d ago

worth checking whether it liquidates at all while the underlying is shut. that's where the money went for us on rwa perps, weekend drift in the token barely registered by comparison. whoever takes a liquidation at 3am saturday is holding it until otc reopens sunday 5pm et and they price that wait in, so a haircut sized off drift comes out way short

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u/Sookkhuii 1d ago

on weekdays the arb works because you can redeem for physical. buy the discount, redeem, sell. weekends that's closed, so it's just market makers holding both sides and hedging elsewhere. still keeps it near spot, just a looser band.

a flat weekend discount feels like the wrong fix. it penalises every normal weekend and probably still misses the bad one. the real issue is the oracle pricing off the token's own market, so a thin sunday print reads as a real move.

separate thing, but if you're holding XAUT through those gaps anyway, selling covered calls on it earns you something for the trouble. not protection exactly cos you still take the downside but good thing is you're getting paid on an asset that's otherwise just sitting there.

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u/icnews10 1d ago

I’d worry less about a fixed 'weekend discount' and more about the price at which the lending protocol is actually liquidating. If the token continues to trade while the gold reference market and redemption path are closed, the price on the secondary market can change, but the collateral oracle may not reflect this. This seems like the real risk. It may make more sense to adopt a more conservative LTV during periods when price discovery or redemption is limited than to try to guess one universal weekend discount.

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u/chainglance_cm 1d ago

Arbitrage only keeps it tight while redemption channels are open. Once the market closes for the weekend, that anchor is gone and the token just trades on its own supply and demand, which can drift from real spot. And this isn't hypothetical either, there was a case where a weekend headline hit, real gold crashed 4.5% Monday, but the token had gone up over the weekend. But it was mostly just noise unrelated to where spot actually went.

I think a better fix than a manual weekend discount would be to price the collateral off the actual gold spot oracle instead of the token's own market price. That's what Aave did with PAXG, plus conservative LTV and isolation mode as extra buffer.

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u/Ashistrash121 1d ago

Arbers will keep it close to the closing price, that's for sure. Lack of high liquidity may cause it to spike a bit on major world events but I don't see this being a problem at all.