Home Investment The Enhanced Gold Liquidity

The Enhanced Gold Liquidity


A liquidity portfolio has lots of challenges as was made clear by the recent financial crisis in 2009. The credit rating of an asset does not necessary equate to the liquidity level as there are different agreements involved in the process and guidelines which must be taken into consideration.

The one thing that remained clear even during the financial crisis is that gold markets in different parts of the world remained steady in terms of liquidity. When other markets faced low concentrations and reductions in size, the quality and behavior of the gold market continued to be very impressive.

The best thing about gold is that any size is a good size. This is because the material is indestructible, meaning that all gold mined over the centuries still exists somewhere and in some form in the market. Compared to bonds, gold is a better form of investment and saves many situations that could otherwise be very unfortunate for investors. It cannot be compared to the volumes needed to make an impact in the market taking into consideration that even a small amount of gold channeled to investments can save an investor lots of frustration.

The liquidity of gold has been made possible by the increasing demand for this commodity in the market. The markets have diversity in terms of the willing buyers and willing sellers for gold, so it is highly unlikely to find a time when there is not a willing buyer and seller in the market for this commodity. It does not depend on investments which need to increase in value or which determine the demand for gold as it is dependent on its core value which increases with each passing day.

Since any changes in the gold market come with different reactions from the overall market, gold has had steady buyers and sellers. Whereas there are those who will wait for the prices to rise to make a killing when selling what they have or liquidating their gold, a small drop in the price of gold will also cause an increase in the demand for the commodity. This is because the different sellers and buyers in the market have different trading needs and motivations and this therefore keeps the cycle moving in the right direction. Gold has remained a popular asset and most investors take comfort in owning it as it provides the soft cushion they need during hard economic times when other assets face difficulties in the market.

Copyright (c) 2011 Rod Hoss