So what exactly is a safe haven?
A safe haven is an asset that holds its value in volatile, uncertain and unexpected events.
It is also 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 promise and 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, rising in periods of heightened turmoil, when other investments can suffer huge and wild losses, but those safe haven assets may also fall when the uncertainty and strife reverts to more normal levels.
We can see this in the price of gold over the decades, both in the wake of the Global Financial Crisis beginning in 2008 and with the COVID-19 crisis and now in the collapse of several prominent major banks.
