What is a safe haven?
A safe haven is an asset that investors expect to hold its value, or rise, when markets are stressed. Demand for it grows when fear grows.
Common safe havens
Gold, high-quality government bonds such as US Treasuries, the Swiss franc, the Japanese yen and at times the US dollar are the assets most often described this way. Each has a different reason: gold has no issuer, Treasuries are backed by a large government and the franc and yen come from countries with large external surpluses.
Why gold is on the list
Gold is a physical asset with no credit risk, it has been a store of value for centuries and central banks hold it as a reserve. It is also priced independently of any company or government.
Safe havens do not always rise
In a sudden rush for cash, investors may sell everything, including gold, to cover losses elsewhere. In the sell-off of March 2020 gold fell for a time before recovering. The safe haven role works best over longer periods than single days.
How to read it
If stocks fall and gold rises on the same day, safe haven demand is one possible reason, but interest rates and the dollar often matter more. Look at several markets together and not at one price.
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Educational content, not investment advice.