A safe haven is an asset that holds its value during volatile, uncertain, and unexpected events.
It is different from a ‘safe asset’ that provides a guaranteed return, such as government bonds. In buying such a bond you effectively lend money to the government in return for a promise it will repay that money with some interest in the future.
Safe assets are ‘fixed income’ assets, and their prices are relatively stable.
The price of a safe haven asset on the other hand will fluctuate and change, sometimes rising in periods of heightened turmoil when other investments suffer huge losses, and sometimes falling when the uncertainty and strife reverts back to normal levels. However over time, in general, a safe haven asset will follow a steady path that doesn’t deviate as suddenly or often as typical investments.
Gold and silver are often referred to as safe haven assets, based on historical results and reactions to global crisis events. We can see this in the price of gold over recent years, both in the wake of the Global Financial Crisis in 2008 and following the COVID-19 pandemic.
Central banks still hold huge gold reserves, and its ancient appeal, tangible value, and unwavering rarity allow it to maintain its safe haven status in the modern world.
