Gold as Crisis Liquidity

The gold market is recovering after posting one of its worst monthly declines in decades. While this price performance has disappointed some investors, many analysts believe that gold has behaved exactly as expected.

Last month, rising geopolitical tensions driven by the joint U.S.-Israel conflict with Iran created widespread uncertainty in the global economy. This situation triggered a supply chain crisis that affected multiple sectors, including food production and energy markets. In such conditions, gold was used as a key source of liquidity, making the selloff appear both logical and expected.

At the same time, the London Bullion Market Association (LBMA) and the World Gold Council have intensified efforts to strengthen gold’s position within the global financial system. On March 31, the two organizations launched a dedicated platform designed to provide reliable, data-driven evidence supporting gold’s status as a High-Quality Liquid Asset (HQLA).

In an interview, LBMA Managing Director Ruth Crowell emphasized that recent market volatility has once again demonstrated gold’s reliability as a source of liquidity during times of crisis. According to her, from the global financial crisis to the COVID-19 pandemic and recent geopolitical shocks, gold has consistently proven its ability to be converted into cash when it is needed most.

She explained that selling gold in such periods should not be interpreted as a sign of weakness, but rather as evidence of its proper function. Countries are monetizing their gold reserves to meet domestic liquidity needs, reinforcing its role as a strategic reserve rather than merely a store of value.

Crowell also noted that focusing solely on gold’s price volatility can be misleading. What truly matters is how the asset behaves relative to others during periods of stress. Gold continues to act as a safe-haven and reserve asset, effectively fulfilling its role in times of uncertainty.

The joint LBMA and World Gold Council platform aims to address a long-standing gap in regulatory frameworks. Historically, gold has been excluded from top-tier HQLA classification under Basel III rules due to the lack of standardized data demonstrating its performance in crisis scenarios. However, newly compiled datasets now provide strong evidence of gold’s liquidity characteristics across multiple crises.

According to these institutions, gold’s deep and global market, lack of credit risk, and ability to quickly generate cash make it a strong candidate to stand alongside traditional assets such as government bonds in liquidity buffers.

Meanwhile, central bank behavior further supports this trend. In recent years, official gold purchases have surged as countries seek to diversify away from the U.S. dollar and adopt neutral reserve assets with no counterparty risk.

Crowell highlighted that gold is increasingly being viewed as an international monetary asset without third-party liability. However, she stressed that full regulatory recognition will require time, continued engagement, and education.

Finally, broader market trends also support gold’s evolving role. Investors are increasingly viewing gold not just as a hedge or speculative asset, but as a core component of diversified portfolios—especially in a world characterized by geopolitical fragmentation and recurring liquidity shocks.