This item can be very difficult to obtain, as the procedure is fairly random. Here are the steps to locate the item:
- Travel to the "Path to the Oasis" waypoint. Make sure the game is set to the seventh (7th - Blood and Sand) or later quest.
- Head southeast until you find a small path leading to a watery clearing (see image, top left section).
- Look for Zaven the Alchemist, who must be saved from Deathly Haunts (he does not always spawn, in which case you must leave the game and "Resume Game" to remake). Spawn rate is estimated at 10-15%.
- As a reward for saving Zaven, he will open the door to the Mysterious Cave. Explore the rather large, multi-leveled cave.
- Look for the Mysterious Chest -- This is NOT the Resplendent Chest found at the end of the dungeon, both may coexist. The Mysterious Chest does not always spawn, just like the merchant. However, when it does, it usually spawns in the 1st level of the cave but it can spawn on the 2nd level so it's a good idea to check both levels until you find it. If you do not find the chest, you must leave the game and "Resume Game" to remake once again. Spawn rate is estimated at 20-50%.
- When you locate the chest, Liquid Rainbow will be found inside. All party members will have their own account-bound version of the item.
Note that Zaven also has a chance to spawn elsewhere in the "Dahlgur Oasis" but the potential spawn point listed above is always in the same place and hence is easier to farm.