Stock Market · Currency, Commodity & GSec

Safe-haven assets in crashes

In times of crisis, market crashes, geopolitical shocks, pandemic, investors panic and move money into assets that preserve value. These are called safe havens.

The classic safe havens

1. Gold: 5,000-year history as a store of value. No counterparty risk. Rises in almost every major crisis.

2. US Dollar (USD): global reserve currency. When world panics, everyone buys dollars.

3. US Treasury bonds: sovereign debt of the world's largest economy. Considered risk-free.

4. Japanese Yen (JPY): Japan is a net creditor nation. Yen rises in risk-off as carry trades unwind.

5. Swiss Franc (CHF): neutral country, strong banking system, historically stable.

> During COVID crash (March 2020): Gold rose. USD rose. Nifty fell 40%. Crude crashed. Safe havens did exactly what they promised.

What is NOT a safe haven (despite popular belief)

• Cryptocurrency: crashed with equities in 2022, offered no protection in 2020 initial panic.
• High-dividend stocks: dividends get cut in recessions, stocks fall sharply.
• Indian government bonds: can be sold by FIIs in risk-off, causing both bond and Rupee pressure.

Portfolio allocation

A 5-10% allocation to gold in a portfolio historically reduces drawdown during crashes with minimal impact on long-term returns. It's cheap insurance.

Goldthe safe haven most reachable from an ordinary Indian retail account

SGBs or gold ETFsroutes that skip making charges and storage risk

Leveraged safe-haven tradesthe panic move is usually over before the leverage pays

Takeaway. Safe havens (gold, USD, US Treasuries, JPY, CHF) rise when markets crash. A 5-10% gold allocation reduces portfolio drawdown. Cryptocurrency is NOT a safe haven. It has historically fallen with equities during risk-off events.