Been farming on and off since release for the liquid rainbow... Nothing. Does this even drop... ffs.
Hours and hours wasting away..... ffs.
It doesn't drop from mobs, and it doesn't drop from a resplendent chest. You go to the Dahlgur Oasis and head to the little alcove a short distance from the entrance of the Oasis, on the south side of the map. Every now and then you will find a merchant being attacked by some ghost. Kill them, and go into the Mysterious Cave.
In the Mysterious Cave, on the first floor, is something called a "Mysterious Chest". It glows like a resplendent chest, but only drops the Liquid Rainbow. I think it took me less than 10 tries, and assembling the staff entirely was a couple hour ordeal.