Gold doing its job: LBMA’s Crowell makes case for HQLA status

Many analysts have explained that gold’s selloff last month was completely logical, as it has been an important source of liquidity after the joint U.S.-Israel war against Iran generated significant uncertainty in the global economy, sparking a supply chain crisis that has impacted everything from food production to energy markets.

Rising demand for emergency liquidity comes as the London Bullion Market Association (LBMA) and the World Gold Council intensify their efforts to formalize gold’s role within the global financial system. On March 31, the two organizations launched a dedicated platform aimed at demonstrating gold’s credentials as a high-quality liquid asset (HQLA), providing market participants and regulators with data-driven evidence to support its inclusion in prudential frameworks.

In an interview with Kitco News, Ruth Crowell, managing director of the LBMA, said that recent market volatility has reinforced gold’s role as a source of liquidity during periods of stress. From the global financial crisis to the COVID-19 pandemic to recent geopolitical shocks, she said gold has consistently functioned as a reliable asset that can be monetized when capital is needed most.

“It’s selling the winners to pay for the losers,” she said. “It is a point where you can pull cash out, and it behaves very similarly to U.S. Treasuries from that point of view.”

Crowell explained that in the current environment, gold should not be seen as a failing asset, but as a functioning one. She noted that countries are monetizing their holdings to meet domestic liquidity needs, underscoring gold’s role as a strategic financial reserve rather than a passive store of value.

According to Crowell, the key issue is not whether gold exhibits volatility, but how it behaves relative to other assets during times of stress.

“People focus on the volatility. However, it’s not quite that simple. It’s still a safe-haven asset. It’s still a reserve asset, and it plays its role during a time of crisis,” she said.

The joint LBMA/WGC platform seeks to address a long-standing gap in the regulatory debate by providing quantifiable data to support gold’s liquidity characteristics. Historically, gold has been excluded from top-tier HQLA classifications under Basel III rules, largely due to a lack of standardized data demonstrating its performance in crisis scenarios.

“We went away and created that data set… and now we have multiple crises to analyze,” Crowell explained, pointing to consistent evidence that gold provides liquidity when markets are under stress.

The argument put forward by the LBMA and the WGC is straightforward: gold’s deep, global market, lack of credit risk, and ability to generate cash quickly make it a strong candidate for inclusion in diversified liquidity buffers alongside traditional assets like government bonds.

At the same time, central bank behavior is reinforcing this thesis. In recent years, official sector purchases have surged as countries diversify away from the U.S. dollar and seek neutral reserve assets with no counterparty risk.

“It’s unsurprising that gold is being looked to as an international currency, one that has no third-party liability,” Crowell said.

Looking ahead, while regulators are showing increasing openness to discussions, Crowell emphasized that progress will depend on continued engagement and education.

“It is a marathon, not a sprint,” she said, adding that the organization’s primary message to policymakers is simple: “Look at the data.”

Beyond regulatory classification, Crowell added that broader market trends also support gold’s evolving role. Investors increasingly see the metal not just as a hedge or a speculative play, but as a core component of diversified portfolios—particularly in a world marked by geopolitical fragmentation and recurring liquidity shocks.

“There’s a growing recognition that gold should be part of any diverse portfolio,” Crowell said.