Safe Haven Assets Are Getting Weaker
Taki Tsaklanos | May 07, 2017 12:02AM ET
During the past trading week, investors clearly displayed a flight out of safe haven assets. Interestingly, that happened even as crude oil fell more than 5 percent on Thursday, an event that should have generated some safe haven asset interest.
Though Reuters mentioned Friday’s safe haven rally was triggered by the oil slump, it is worth noting that the rally stalled very quickly, and basically did nothing on the trend for the week.
First and foremost, gold fell 3.3 percent on the week. Gold futures opened the week at $1272 and close at $1229.
U.S. 10-year Yields acted strong this week. They rose from 22.80 to 23.52 points. Consequently, bond prices went lower.
Rising rates are bad for non-yielding assets like gold. Also, rates rise when bonds fall. So these two safe haven assets mostly move in conjunction.
Not only are the bond and gold market weakening, safe haven currencies are also weak. The Japanese yen, known as a safe haven currency, fell from 0.90 to 0.889 this week. This may not be a collapse, but it confirms the exit out of safe haven assets. Meanwhile, the dollar is trading sideways. It has been trading between 98.50 and 101 points for two months now.
This weakness in safe haven assets is occurring right at a time when U.S. stocks are trading at all-time highs, the strongest emerging markets are at all-time highs, and European stock markets are breaking out.
This indicates that the stock market rally is not over yet. It will be interesting to see whether investors will apply the “sell in May” market adage and go away … they still have three trading weeks left.
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