What is a safe haven asset?
In one line: A safe haven is an asset that investors tend to buy when markets get nervous, because they expect it to hold its value better than riskier assets.
The usual safe havens
- US Treasuries: loans to the US government, seen as very unlikely to default
- The US dollar: the world's main reserve currency, needed to settle many global debts
- The Japanese yen: Japan is a big lender to the rest of the world, and money tends to flow home in a crisis
- The Swiss franc: a long record of political stability (see USD/CHF)
- Gold: no company or government behind it to fail (see the gold futures page)
A simple example
Picture a sudden shock: a big bank fails overnight. The next morning, often (not always):
- Stocks open 2% lower.
- Gold rises $30 an ounce.
- The yen and Swiss franc strengthen.
- Treasury prices climb, so their Bond yields fall.
That's money leaving riskier things and heading for shelter. It's the "off" half of Risk-on and risk-off.
Why it matters
Safe havens explain many moves that look strange on a chart. A pair like USD/JPY can drop sharply on a day with no Japanese news at all, simply because worried investors are buying yen. Knowing this helps you avoid stacking several trades that all lose on the same scary day.
A common mistake
Thinking a safe haven can't fall. In March 2020, as COVID-19 hit, investors sold almost everything to raise US dollars. Gold dropped more than 10% in a matter of days before recovering later. "Safe" describes how an asset tends to act in a scare, not a guarantee.
Gold also swings a lot day to day, and a full gold futures contract moves $100 for every $1 an ounce. Set your stop from the chart and size it with the position size calculator. Our gold trading guide covers the details.
Questions
Is bitcoin a safe haven?
It's debated. Some call it "digital gold," but in many sell-offs bitcoin has fallen along with stocks rather than rising like gold.
Why does the yen rise when markets fall?
Japanese investors hold a lot of money abroad. In a scare, many bring it home, which means buying yen. Traders also close trades that borrowed in yen.
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