How are safe-haven assets performing amid market turmoil triggered by technology, energy, and the crisis in France?

According to Zhitong Finance APP, as artificial intelligence anxiety has weighed down technology stocks, the war in Iran continues to keep energy prices elevated, and persistent concerns about high government debt, there is strong demand for safe-haven assets. However, traditional safe-haven assets have not performed as expected this year: gold experienced sell-offs after the start of the Iran war—as investors incurred losses in other assets, they sold off the best-performing assets to realize gains; government bonds, once considered one of the world’s safest assets, have also seen significant volatility.

The following is an overview of several current types of safe-haven assets.

1) The “Love-Hate Relationship” with the Dollar

Breaking last year's "Sell America" theme, the dollar has been on the rise since the Iran war began, climbing 4% since late February. This reinforces its role as the preferred safe-haven asset during periods of global stress. Robust economic performance, higher interest rates, and the U.S.'s position as an energy exporter have all contributed.

However, factors that make traders question the dollar's long-term safe-haven status persist—such as the over $40 trillion debt stock and policy uncertainty. The dollar is also vulnerable to tech stock sell-offs, having previously benefited from record capital inflows into U.S. equities amid the AI investment boom.

Kit Juckes, Chief Foreign Exchange Strategist at Societe Generale, said that the dollar might be nearing the end of a bull market. “It won't go much further,” he pointed out, but it is difficult to make a case for a sustained bet against the dollar given that “the global narrative is: the dollar is a petro-currency, and we are in an energy crisis.”

2) Europe Wobbles, Buy Swiss Franc

The bond turmoil triggered by France leads to one conclusion: when Europe is in turmoil, the Swiss franc is the preferred safe-haven. So far this month, the franc has risen more than 2% against the euro and is poised for its biggest monthly gain since late 2023.

Georgette Boele, Senior FX and Oil Strategist at ABN Amro, stated: “Concerns about France's public finances, coupled with election uncertainty in both France and Spain, are supporting the franc.”

She added that investors are increasingly reluctant to fund carry trades with the franc and are unwilling to take short positions on a currency with safe-haven attributes. With Swiss interest rates at 0%, the franc has been popular for “borrowing low-yielding currencies and investing in higher-yielding assets elsewhere.”

Analysts also say AI anxiety should favor the Swiss franc.

3) German Bunds Are the Relative Winner

Amid fears over fiscal health, the reputation of government bonds as safe-haven assets has been tarnished. From the U.S. to Japan, borrowing costs have recently hit multi-decade highs. However, the tech-led sell-off in equities has rekindled some demand for bonds.

Another noteworthy development: earlier this month, while the yields on 10-year U.S. and French sovereign bonds hit 24-year highs, German bund yields moved lower as prices rose.

Investors say this is a clear signal—that among the major economies, AAA-rated German bunds stand out as a safe-haven asset.

Joachim Nagel, President of the Bundesbank, said that amid bond turmoil, Germany remains Europe's anchor of stability and is “regaining health” after years of stagnation.

Johnathan Owen, portfolio manager at TwentyFour Asset Management, said: “Everyone worries about contagion in Europe, and whether German bunds will be dragged down by (French bonds) OATs or (Italian bonds) BTPs, so it's a good thing that bunds can play the role of Europe’s safe haven.”

4) Don’t Forget Short-Term Bonds

Investors say that, overall, persistently high debt in major economies will continue to weaken the safe-haven status of long-term government bonds. But short-term bonds can offer some shelter, because they are less sensitive to debt concerns.

Rory McPherson, Chief Market Strategist at Wren Sterling, said: “We are very optimistic about short-term bonds. Due to all the worries about debt and deficits, we haven't been buying longer-dated bonds.”

5) Gold Still Shines

The other traditional safe-haven asset, gold, has had a bumpy ride. After hitting a record high of $5,595 per troy ounce in January, the price of gold fell as the Iran war began and investors turned to this precious metal after losses in other assets.

In August, as inflation concerns resurfaced and markets worried about whether the Fed was doing enough to curb price pressures, gold rebounded again. Currently, gold is trading near $4,175. Analysts say central bank gold buying and safe-haven demand are supporting gold prices above $4,000.

Although high interest rates should limit gold's upside potential, geopolitical tensions and concerns over U.S. fiscal health are expected to continue to support this safe-haven metal well into the future.

Julius Baer analyst Carsten Menke stated: “Over the longer term, gold should benefit again from continued robust central bank purchases, and renewed market concerns about U.S. debt and its ever-growing interest burden.”