LBMA has been collaborating with World Gold Council (WGC) on advocating for a reclassification of gold to a tier one high quality liquid asset (HQLA).
Last year, WGC commissioned an experienced academic - Professor Dirk Baur - who has numerous academic papers already published on gold, to examine whether gold qualifies as a HQLA according to the Basel Committee on Banking Supervision's criteria. The analysis demonstrates that gold meets all market-based criteria and as many fundamental criteria as bonds for HQLA. The paper looks at gold’s liquidity, volatility, its performance as a flight-to-quality asset and its diversification properties; during ‘normal’ periods and stress events.
The analysis supports the inclusion of gold as a high quality liquid asset. The metal’s liquidity, stability, and safe haven properties make it a valuable addition to the HQLA category, providing significant benefits to financial stability and risk management. Johan Palmberg (WGC) and David Gornall (WGC and LBMA) were co-authors. The paper is available via SSRN.