Gold Proves Its Mettle As Market Turmoil Grows, Shows HQLA Strength: WGC

High-Quality Liquid Assets (HQLA) are assets that are easily and quickly convertible into cash without significant loss of value, even during times of financial stress

Its intraday bid-ask spreads averaged around 2.2 basis points, slightly wider than the 10-year Treasury but tighter than the 30-year

Source : Freepik

In the backdrop of recent US trade policy and uncertainty in the financial markets, safe-haven gold has exhibited characteristics of a High-Quality Liquid Assets (HQLAs), according to a research from the World Gold Council (WGC).

High-Quality Liquid Assets (HQLA) are assets that are easily and quickly convertible into cash without significant loss of value, even during times of financial stress.

The WGC's study analysed gold's behaviour over the past six months, including periods of extreme bond market volatility in April, found that gold's volatility, bid-ask spreads, and trading volumes were comparable to, and in some cases, better than, those of intermediate and long-term US Treasuries.

For instance, in early February 2025, when US Treasuries experienced an uncharacteristic selloff and volatility spikes due to tariff announcements, gold remained largely unaffected. Similarly, in April 2025, while gold's volatility increased, it was in line with the 10-year US Treasury and below the 30-year, and gold prices soared to record levels as a flight-to-quality asset.

"Its performance matched or exceeded that of benchmark assets like the 10-year Treasury, reinforcing gold's resilience and liquidity," the WGC study said.
Gold's average daily volatility was 0.027 per cent, comparable to the 30-year US Treasury bonds at 0.028 per cent.

Its intraday bid-ask spreads averaged around 2.2 basis points, slightly wider than the 10-year Treasury but tighter than the 30-year.

Furthermore, gold's LBMA OTC average daily trading volume between November 2024 and April 2025 stood at US145 billion per day, rivalling that of 7-10 year US Treasuries, which averaged USD 143 billion over the same period.

Gold has consistently demonstrated characteristics associated with HQLAs, including low volatility, narrow spreads, and robust trading volumes, even during periods of market turmoil.

Therefore, unlike many other assets, gold is universally recognized, free from credit risk, and accepted globally, making it uniquely suited to meet the global and stress-tested liquidity standards required for Level 1 classification says World Gold Council.