Gold-backed cryptocurrencies are derivatives whose underlying values are linked to the equipment price of gold. With gold-backed cryptocurrency, a single unit of the token represents certain grams or ounces of gold, that is present in the reserves/vaults of the given company. Sometimes trusted custodians are also present within the process.
There are some gold-backed tokens where you can redeem the cryptocurrency against gold. One of the biggest advantages of gold-backed cryptocurrency is its close tie to a tangible asset, mitigating the risks of further price fluctuations. The ERC-20 token standard is primarily used for gold-backed cryptocurrencies.