As strains from an AI-driven selloff in technology stocks, the ongoing Iran war and continued concern about high government debt levels reverberate through markets, investors are re-evaluating which assets genuinely act as refuges in times of stress. The pattern is not straightforward: some traditional safe havens have strengthened, others have shown surprising weakness, and short-dated government debt has emerged as a pragmatic shelter for some managers.
Dollar: a renewed haven, but questions linger
The US dollar has reversed last year’s weakness and mounted a roughly 4% gain since late February, a move that has reinforced its role as a go-to asset in periods of global stress. Market participants cite a combination of a resilient US economy, higher US interest rates and the United States’ position as an energy exporter as factors supporting the currency.
Yet the same concerns that prompted traders to question the dollar’s long-term safe-haven status have not disappeared. The United States carries a debt pile that exceeds $40 trillion and policy uncertainty remains an unresolved issue. The dollar’s rally has also been intertwined with flows into US equity markets driven by optimism about AI investments, leaving it vulnerable to any fresh selloff in the technology sector.
Societe Generale’s chief FX strategist Kit Juckes said the currency might be approaching the latter stages of its bull run. He cautioned that while it is hard to mount a sustained bet against the dollar now, the broader story remains that the dollar behaves like a petrocurrency amid the current energy crisis.
Swiss franc: preferred safe haven when Europe wobbles
When volatility tied to France’s fiscal picture unsettled European bond markets, the Swiss franc emerged as a preferred refuge. The franc has risen more than 2% so far this month against the euro and is on track for its largest monthly gain since late 2023.
Analysts point to specific drivers. Georgette Boele, senior FX and oil strategist at ABN Amro, attributed the franc’s strength to investor concern over France’s public finances and election uncertainty in both France and Spain. She also noted that investors have become less willing to use the franc to fund carry trades, reducing the incentive to position against a currency with safe-haven characteristics.
Low Swiss policy rates - currently around 0% - make the franc attractive in trades where investors borrow in a low-yielding currency to invest elsewhere. A further catalyst for the franc could be continued AI-related equity weakness, which analysts say should enhance demand for the currency.
German Bunds: a relative bedrock amid European bond stress
Government bonds have taken a reputational hit this year as borrowing costs from the US to Japan climbed to multi-decade highs. Still, the recent tech-led equity weakness has revived some demand for government debt as a defensive asset.
Notably, when US and French 10-year yields surged to 24-year peaks earlier this month, German 10-year yields moved in the opposite direction, falling as Bund prices rose. Market participants interpreted that divergence as evidence that triple-A rated German Bunds continue to function as a relative safe haven within major economies.
Bundesbank President Joachim Nagel was quoted as saying Germany would remain an anchor of stability in Europe during bond market turmoil and that the country was "getting fit" after years of stagnation. Portfolio manager Johnathan Owen of TwentyFour Asset Management described the Bund’s behaviour as useful in European risk-off episodes, alleviating concern that Bunds would be indiscriminately dragged lower by stress in other European sovereigns such as French OATs or Italian BTPs.
Short-dated bonds: shelter from long-term debt worries
High sovereign debt loads among major economies have dampened the appeal of long-dated government bonds as a safe haven because those instruments are more sensitive to fiscal concerns. By contrast, short-dated government paper has attracted interest for offering some measure of protection while limiting exposure to long-term debt dynamics.
Rory McPherson, chief market strategist at Wren Sterling, summarized the stance succinctly: investors like short-dated bonds because concerns about debts and deficits have reduced appetite for longer-duration sovereign instruments.
Gold: volatile but supported above key levels
Gold’s performance this year has been uneven. The metal reached a record high of $5,595 per troy ounce in January, then fell after the outbreak of the Iran war as investors liquidated gold positions to cover losses elsewhere. A rally in August followed renewed inflation worries and concerns that the Federal Reserve might not be doing enough to curb price pressures. At present, gold is trading around $4,175 per troy ounce.
Analysts point to central bank buying and safe-haven demand as factors supporting gold’s price above the $4,000 level. At the same time, higher interest rates are expected to constrain the metal’s upside in the near term. Over a longer horizon, Julius Baer analyst Carsten Menke said gold should benefit from continued strong central-bank purchases and renewed concerns about US debt and a rising interest burden.
What this means for investors
The current environment is producing a selective safe-haven response rather than a uniform flight to traditional refuges. The dollar, Swiss franc and German Bunds have each absorbed demand under different stress scenarios. Short-dated government bonds are being favoured over long-duration paper, and gold remains a contested but supported store of value.
Market participants are balancing immediate defensive needs against structural risks such as elevated sovereign debt, policy uncertainty and the potential for further equity weakness tied to AI optimism reversing. These forces will likely continue to shape where investors seek protection as events evolve.