As global stock markets tumble investors are fleeing risk assets in search of traditional safe havens. However some are proving to be considerably more attractive than others.
US Treasury Bonds
One of the first places investors turn to when panic hits is US Treasury Bonds. As the chart below shows the 10 year US Treasury Note is now as high as it was in November 2010 and not far below the level it reached in December 2008. Of course, as bond prices rise, their yields fall and the 10 year treasury is now yielding just 2.39%.
Another traditional safe haven is cash and one of the ‘least bad’ forms of cash today is the Swiss Franc. The chart below shows the Swiss Franc’s recent rise against a basket of currencies.
The ultimate safe haven is once again proving to be gold. Its attraction in a world where no country wants a strong currency and none are backed by anything with intrinsic value is easy to see. Gold is no one else’s liability and it cannot be debased by central bank money printing. The chart below shows gold’s orderly ascent. The gold bull market remains alive and well.
One traditional safe haven that has failed to attract buyers is the US dollar. As the chart below shows, the dollar spiked as equities crashed in 2009 and again in 2010 but has failed to find its footing during this latest panic. One reason for this is that in these previous panics investors were fleeing corporate debt, however this time they are fleeing government debt and the US is one of the worst offenders.