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> a safe liquid asset is gold Unless you're talking about melting gold, I can't see how gold is liquid. Bid/ask spreads are wide and it's hard to (literally) m
by prottog 4y ago
> a safe liquid asset is gold
Unless you're talking about melting gold, I can't see how gold is liquid. Bid/ask spreads are wide and it's hard to (literally) move a lot of it without both incurring costs and moving prices.
- Infinity315 4y agoMost people don't own commodities in physical form for long, usually they buy some stock or ETF which tracks the price of the commodity, typically the ETF or stock issuer carry the physical commodity, so each stock is backed by the physical commodity. This mostly circumvents the issues of moving a lot of it around and the liquidity issue, albeit you pay a management fee which is fractions of a percent typically. Doing it this way is probably cheaper than the alternative of buying and selling the commodities yourself depending on the quantities you're buying as the firm managing it benefits from economies of scale.
- dataviz1000 4y agoGold is considered a Tier 1 safe investment under Basel III which banks can use to meet the capital ratio requirement. Under Basel III, physical gold is considered the same as cash. [0] Either solid or melted gold will work meeting the capital requirements. [0] https://www.marketwatch.com/story/why-basel-iii-regulations-are-poised-to-shake-up-the-gold-market-11624561325 https://www.marketwatch.com/story/why-basel-iii-regulations-...
- prottog 4y agoI learned something new today! And I suppose that makes sense. Gold has been a medium of exchange for millennia, so the convertibility or not (in my discussion of liquidity) of gold to USD isn't as important as it might be for other commodities. It's good to see that Basel III treats paper gold (gold futures or shares in gold-holding ETFs) as more risky than actual gold-in-hand.