Recently, World Gold Council (WGC) published their report, Gold: an HQLA in all but name. In recent months amid trade policy uncertainty, financial markets experienced a decidedly volatile period marked by sharp declines in stock prices, an uncharacteristic selloff in US Treasuries, and a general widening of bid-ask spreads.
Against this backdrop, gold confirmed what previous research studies have found: a highly liquid and orderly market that mitigates market risk in a manner often associated with assets classified as 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.
Gold is a globally recognised, highly liquid asset with deep trading markets and a history of serving as a safe haven in times of financial stress. However, under the Basel III regulatory framework, gold is not classified as an HQLA and is therefore excluded from banks’ liquidity buffers for regulatory purposes.
Basel III’s Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) prioritise assets like sovereign bonds, with NSFR assigning gold a high 85%. Required Stable Funding (RSF) factor, effectively treating it more like a commodity than a well-established cash-equivalent reserve.
Research by Baur et al (2025),6 highlights that while gold is not currently defined as an HQLA, it does seem to satisfy many of the fundamental and market characteristics that assets must meet to qualify as one. Our analysis complements these findings by examining gold’s behaviour over the past six months, including the most recent period of extreme bond market volatility during April of this year.
Concretely, we focus on a few key HQLA characteristics are,
1: Active and sizable market – evidence of breadth and depth through high trading volumes, narrow bid-ask spreads, and diverse number of participants,
2: Low volatility – asset prices should be relatively stable, even under stress,
3: Flight to quality – an asset’s reliable behaviour during a time of systemic crisis that signals market participants confidence.
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