Gold’s Liquidity

Gold is the most liquid commodity market other than crude oil. The recent rollercoaster at the market vividly demonstrated what fact, since from the position of investment analysts the more actively as asset is bought and sold, the more liquid the market for that asset is likely to be. Over a third of all above-ground gold are held in bullion form either by an official sector or by private investor stocks.

The remainder of the total gold stock is utilized by different industries. Sources report that the speed with which the remaining stock of gold could be mobilized depends on its form. To recover gold from electronic components, such as motherboards, laser equipment and mobile phone contacts would take significantly longer than to collect and to refine 24K jewelry. Regardless of its form, however, once gold reaches refinery, its processing only takes a few days.

World Gold Council explains that this liquidity, as well as the speed with which gold can be brought out for resale when prices are high, show that a genuine shortage of gold is highly unlikely, and should such an unexpected event take place, its duration would be extremely short-lived.

Therefore, although the recent market roller coaster transmits a different picture, theoretically, the volatility of the gold price is low. “In addition, gold’s yield curve (the difference between nearby and forward prices) is almost always positive. In other words, forward prices are higher than nearby prices and gold is usually at close to “full carry,” i.e. the percentage between the nearby and forward dollar-denominated prices is very close to prevailing dollar interest rates.” Although, overall gold stock theoretically offers investment security, gold articles, such as gold coins, gold jewelry, gold accessories do not. When their sentimental value diminishes, gold jewelry, gold coins, etc. could always be sold – at the proper time – while gold price is up, to a reliable gold buyer.