Market Speaks: Gold?s recent behaviour akin to High-Quality Liquid Assets says WGC

World Gold Council or WGC has stated in a latest update that in recent months, amid trade policy uncertainty, financial markets experienced a decidedly volatile period marked by sharp declines in stock prices. Against this backdrop, gold showed itself to be a highly liquid and orderly market that mitigates market risk in a manner often associated with High-Quality Liquid Assets (HQLAs). During this period, gold’s volatility, bid-ask spreads, and trading volumes were equivalent to and, in some cases, better than intermediate and long-term US Treasuries.

It noted that over the past six months gold has shown characteristics associated with HQLAs. This includes three factors. First one is volatility as Gold demonstrated comparable or superior stability to intermediate and long US Treasuries during recent market shocks, highlighting its lower-than-assumed volatility profile. Second is spreads. Gold’s bid-ask spreads remained narrow – or normalized quickly – during periods of market stress, rivalling those seen in 10- and 30-year US Treasuries. Third factor is volume as Gold’s robust daily trading volumes rival that of 10-year US Treasuries, reinforcing its status as a deep and actively traded market.

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