What is a ‘Safe Haven’
A safe haven is an investment that is expected to retain its value or even increase its value in times of market turbulence. Safe havens are sought after by investors to limit their exposure to losses in the event of market downturns. However, what are considered safe havens alter over time as market conditions change, and what appears to be a safe investment in one down market could be a disastrous investment in another down market.
Explaining ‘Safe Haven’
Fortuitously timed buy and sell decisions can make an investment appear to be a safe haven when it may not actually be one.
Gold is typically considered a safe haven when currency markets are volatile. United States Treasury Bills are also considered a safe haven even in a tumultuous economic climate because they are backed by the full faith and credit of the U.S. government. In the forex market, the Swiss franc is considered a safe haven currency. Finally, if an entire economic sector is performing poorly but one company within that sector is performing well, its stock could be considered a safe haven.
Further Reading
- Bitcoin for energy commodities before and after the December 2013 crash: diversifier, hedge or safe haven? – www.tandfonline.com [PDF]
- On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier? – www.sciencedirect.com [PDF]
- Safe haven currencies – academic.oup.com [PDF]
- Can cryptocurrencies be a safe haven: a tail risk perspective analysis – www.tandfonline.com [PDF]
- Is Bitcoin a better safe-haven investment than gold and commodities? – www.sciencedirect.com [PDF]
- Is gold a safe haven? International evidence – www.sciencedirect.com [PDF]
- Is gold a hedge or safe haven against oil price movements? – www.sciencedirect.com [PDF]
- Is gold a safe haven or a hedge for the US dollar? Implications for risk management – www.sciencedirect.com [PDF]
- Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold – onlinelibrary.wiley.com [PDF]
- What precious metals act as safe havens, and when? Some US evidence – www.tandfonline.com [PDF]
