People want to invest wisely and desire that their assets shall not depreciate due to inflation or due to any economic turmoil. Investment in real estate is localized and always under the scanner of government scrutiny, therefore investors rush for a safe-haven investment.
Example of Safe Haven investment
- Gold: For years, gold has been considered a store of value.
- Treasury bills (T-bills): Due to government guarantee it s considered as safe with assured return, untouched by inflation.
- Defensive stocks: Utility stock such as food, healthcare, and diversified consumer goods, which have always demand in the market.
- Cash in hand: It is always good to keep good amount of cash in hand. It shall always pay at the time of trouble without depending on the Bank or return of dividends.
“The Swiss franc[CHF] is considered a safe-haven currency.”
Switzerland was previously a Tax haven with its robust Banking system, tax evaders may stash their wealth secretly in Swiss Bank and therefore Swiss frank always had an upward pressure comparing to the other currencies. Therefore, converting one national currency to Swiss frank is to be considered safe in terms of value. On the other hand in a market system where the market is volatile itself due to political or other factors, something in the morning and something in the evening, people never put trust in their own national currency, rush to convert it in Swiss frank or any other stable currencies for saving the value.
Japanese yen, another safe haven, was the only Asian currency to appreciate during the Great Recession, impacting the global economy and altering the balance of power in global FX markets. [https://voxeu.org/article/why-was-japan-s-trade-hit-so-much-harder]
Therefore, three major safe-haven currencies are the U.S. dollar and U.S. Treasuries; the Japanese yen and Japan’s government bonds; and the Swiss franc and Swiss government bonds.
As exemplified above Gold is the Safe-haven asset. At the time of the declining economy, the gold glitters more. Gold lost its charm the moment the economy recovers.
Bitcoin recently joined the ranks of safe-haven assets [https://www.forbes.com/sites/panosmourdoukoutas/2019/08/08/bitcoin-joins-the-ranks-of-safe-haven-assets/]
The trade war between the U.S. and China of this summer stipulated a global synchronized slowdown which is wreaking havoc on emerging market countries such as India. People of India love to invest in Gold rather than in any volatile market. Indian market is considerably stable due to political stability under a Modi government. Investors have confidence that even in the 2022 election the same dispensation shall function, so there shall not be any major shift in policy.
TUESDAY, OCTOBER 15TH, 2019