EXPLAINED

Safe havens

  • 21 November 2019
  • 1 minute

During times of stock market turmoil or economic uncertainty, investors often move their money into investments that they consider to carry less risk of loss. These are sometimes called ‘haven’ assets.

Gold has long been a perceived haven despite the fact that, unlike bonds, shares or cash, there is no reward for holding it. This is because there is a common perception that gold holds its value in the face of inflation and is unlikely to ever become worthless. It has been used as a store of economic value in this way for thousands of years.

Other haven assets include cash deposits (as investors can be rewarded with interest payments) and government bonds. US government bonds are particularly regarded as being a low risk. They are issued by the government of the biggest economy in the world and the US has never missed an interest payment on bonds it has issued.

In currency markets, the Swiss franc is favoured when investors are nervous. This is due to the historically dependable long-term performance of the Swiss economy.

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