Safe-haven demand rises as tech, energy and Europe risks unsettle markets

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Safe-haven demand rises

Highlights

The U.S. dollar has rallied 4% since late February, supported by strong economic data, higher rates, and energy exporter status, despite policy uncertainty and over $40 trillion in debt.
The Swiss franc is up more than 2% against the euro this month, poised for its largest monthly gain since late 2023 amid heightened concerns over French debt and elections.
Gold, after peaking at $5,595 per troy ounce in January and slumping post-Iran war onset, now trades around $4,175, supported by central bank buying and persistent haven demand.

How major safe havens are performing

As reported by Reuters, demand for defensive assets remains firm as AI-related nerves weigh on technology shares, the Iran war continues to support energy prices, and concerns over heavy government debt burdens persist.

The U.S. dollar has broken with last year's sell-U.S. theme and has rallied 4% since late February, reinforcing its role as a refuge during periods of global stress. Support has come from a strong economy, higher interest rates and the U.S. position as an energy exporter, although its long-term haven status remains under scrutiny because of policy uncertainty and debt exceeding $40 trillion.

In Europe, the Swiss franc is emerging as a preferred refuge during regional volatility. It is up more than 2% against the euro so far this month and is on track for its biggest monthly rise since late 2023, helped by worries over France's public finances and election uncertainty in France and Spain.

German government bonds are also standing out relative to peers. While borrowing costs in major economies have climbed to multi-decade highs, investors have moved into triple-A rated German Bunds during the recent tech-led equity selloff, pushing their yields lower even as U.S. and French 10-year yields reached 24-year highs earlier this month.

Investors are also favouring short-dated bonds over longer maturities. Market participants say shorter-dated sovereign debt offers more protection because it is less sensitive to concerns about rising debt loads across major economies.

Debt and geopolitics reshape market shelters

Gold, another classic haven, is showing a less straightforward pattern. After reaching a record $5,595 per troy ounce in January, it fell after the Iran war began as investors sold strong-performing assets to cover losses elsewhere, before rebounding in August as inflation worries returned and concern grew that the Federal Reserve was not doing enough to contain price pressures.

The metal is now trading around $4,175, with analysts saying central bank purchases and haven demand are helping keep prices above $4,000. Although high interest rates may limit further gains, geopolitical tension and concern over U.S. fiscal strains are expected to support gold over the longer term.

The broader picture suggests that investors are becoming more selective about where they seek protection. Rather than relying uniformly on traditional havens, markets are rewarding assets seen as better insulated from debt risks, regional political instability and volatility tied to technology valuations.

In our earlier report on rising sovereign borrowing risks amid geopolitical tensions and elevated fiscal spending, we noted that higher global interest rates are squeezing governments’ finances and increasing refinancing strain. We also highlighted that emerging and frontier markets are particularly exposed because debt-servicing costs are high relative to narrower revenue bases, while energy- and food-price shocks linked to ongoing conflicts add to inflation and credit pressures.

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