What are Safe Havens?
So called 'safe havens' have been vital to global markets for decades, a place for the average unsure investors to invest with low risk, and with a vision of capitalising on global market stress. Safe havens are companies, commodities or indicies that tend to retain or increase their value in time of market stress and underperformance. Examples include the US treasuries, USD and other international currencies and Gold. These safe havens often gain value as a direct result of risk - off sentiment within the market during market stress, volatility or economic turndown. A defensive move by investors to take their money out of growth and tech stocks, and pivot into these assets and sectors will inevitably drive the value of these investments further, all the while allowing a secure off-set investment, which is more risk averse than the climate of the general stock market.
Gold as a Safe Haven
Gold has long stood as one of the most reliable safe - haven assests, a place that investors turn to when markets are usntable or trust in fiat currencies and financial system weakeness. Gold is a physical, finite resource with thousands of years of percieved value across cultures and economies. Gold has no counterparty risk, it does not rely on performance, companies or governments to dictate its overall value. This makes it incredible attracting to investors in times of market stress. Due to the fact that gold is a physical, finite resource it also cannot be printed and inflated, unlike fiat currencies that are not backed by a physical commodity. Therefore gold is largely unaffected by inflation changes or loose monetary policies. In time of Geopolitical or Market crisis gold often outperforms riskier assests and acts as a crisis shield for many portfolios.
Facts
Enough explaining, lets look at some facts;
- During the period from 2001 - 2011, gold rose from $270 to $1,900/oz. This was driven by the 2008 financial crisis, dot - come bust and 9/11.
- During the period from 2011 - 2015 markets regained confidence. The USD gained strength, Fed tightened and there was deflation fears. During this period of strength within the market gold fell to around $1,050/oz, a lose of $850.
- During the period 2016 - 2020, driven by further economical and geopolitical instability such as Trumps trade wars, Brexit and COVID-19, gold rebounded to $2,070/oz.
- In 2021 and 2022 as markets regained a bit of stablility, gold stabilised flat.
- Since 2023 to this current day, gold has surged to new highs of $2,450/oz, driven largely buy inflation, rate cut expectations, Middle east conflicts and Central bank buying.
What is the Outlook?
The current outlook for gold is bullish, but still volatile. The value will likely depend on three key factors; macroeconomic stability, geopolitcal risks, and central bank policy. Current geopolitical factors such as the wars in the middle east, and sticky inflation concerns has driven a more positive outlook towards the current value of gold, and expectations of rate cuts also plays in favor of this commodity. However gold does have some headwinds heading into the back stretch of 2025, if risk sentiment improves then it is likely that capital will rotate back into equities and weaken gold, however this weakening of gold has never proven to be catasrophic before (such as a tech stock crashing), and the current global political and economical situation hints towards a further risk off sentiment as international underperformace and tensions increase.
