Safe Haven Investments

Aug 26, 2019 0 Comments
Safe Haven Investments

Safe Haven - Investment

 

What is a Safe Haven - Investment? 

A safe haven is an investment that is expected to retain or increase in value during times of market turbulence.

Understanding Safe Haven - Investments

A safe haven investment diversifies an investor’s portfolio and is beneficial in times of market volatility.

Examples of Safe Havens 

There are a number of investment securities that are considered to be safe havens. Some of them include:

  1. Gold: For years, gold has been considered a store of value. As a physical commodity, it cannot be printed like money, and its value is not impacted by interest rate decisions made by a government. Because gold has historically maintained its value over time, it serves as a form of insurance against adverse economic events.

 Safe Haven Investment

  1. Treasury bills (T-bills): These debt securities are backed by the full faith and credit of the U.S. government and, hence, are considered safe havens even in tumultuous economic climates. T-bills are considered to be risk-free, as any principal invested is repaid by the government when the bill matures. Investors, therefore, tend to run to these securities during times of perceived economic chaos.

 Debt vs GDP

Safe Haven Investments

U.S. Treasuries vs. Gold 

  1960 - 2019 Chart (Treasuries vs Gold)

For 4o years U.S. Treasuries was the place to have your savings. U.S. Treasuries are still, today, a good safe-haven for your savings. However, in July of 2006 something changed, as you can see on this chart from the Federal Reserve Bank. 

Gold once again made an appearance and has been playing an important role as a safe-haven investment for Central Banks all around the globe.  Many wealthy investors are using gold to protect their assets.

 

  1. Defensive stocks: Examples of defensive stocks include utility, healthcare, biotechnology, and consumer goods companies. Regardless of the state of the market, consumers are still going to purchase food, health products, and basic home supplies. Therefore, companies operating in the defensive sector will typically retain their values during times of uncertainty, as investors increase their demand for these shares.

 

  1. Cash: Arguably, cash is considered the only true safe haven during periods of a market downturn. However, cash offers no real return or yield and is negatively impacted by inflation.

 Dollar vs Inflation

 

  1. Safe Haven CurrenciesSome currencies are considered safe havens compared to others. In volatile markets, investors and currency traders may seek to convert holdings of cash into these currencies for protection.

The Egyptian Empire, Roman Empire, British Empire all started with sound money (gold & silver) and after years of debasing their currency to zero, people lost confidence and a new currency replaced the old one. Each time returning to sound money and the value of the new currency that emerged to replace the old one was determined by taking the base currency that was created and issued into circulation, divided by the precious metals available. Hence the new price/value for gold & silver and the basis for the new currency. American Imperialism started exactly the same way and will end exactly the same way. All of the world’s most powerful institutions and leaders of these institutions agree. The benefactors will be the holders and owners of gold & silver.

 

 Money Supply - Divided by Gold & Silver

 

Gold - (Click)

Silver - (Click)

 

WSJ Daily Gold & Silver Prices - (Click)