Why investors flock to gold and other safe havens?

When there is economic turmoil or geopolitical conflict, there is often an increase in interest in ‘safe haven’ assets. Investing in them is a strategy that aims to preserve capital and limit risk, at a time when markets are volatile and unstable. Diversifying one’s portfolio with safe haven assets can also help protect traders from the potential losses of their riskier investments. At Alpari, we have put together a guide into safe haven assets, with a focus on gold, including some recent data about how prices are moving and might be predicted to shift. 

Gold is perhaps the best known example of a safe haven asset, having been used as an investment in this way historically in many different countries, holding its value while markets fluctuate. Gold is also sometimes perceived as a hedge against inflation, rising in value in line with inflation, although the extent to which it does varies based on various market factors. But what’s definitely true is that its scarcity helps increase its value. Demand remains strong thanks to gold’s popularity as an investment as well as a luxury material, but the availability of gold is always decreasing, with much of the remaining ore very far beneath the earth’s surface. According to the World Gold Council, over 90% of the world’s gold has already been mined.

Other safe havens

• Certain currencies are also thought of as safe haven assets too, in particular the Japanese yen,  the Swiss franc and the U.S. dollar. In times of volatility, the values of these currencies relative to others tend to increase on the Forex market. However, so far in 2025, the Swiss Franc and Japanese Yen have both strengthened against the U.S. dollar due to concerns regarding the U.S. economic outlook, especially in light of US President Donald Trump’s latest wave of tariffs. 
   
• Other precious metals like silver and platinum might also be considered to be a safe haven, though less so than their more illustrious cousin, gold. But the rationale remains the same: their scarcity, enduring popularity, and potential use as a store of value during market instability.
   
• Government bonds can also be considered a safe haven, as investors who opt for these assets will receive a guaranteed fixed return. However, over the long term, it’s typically lower than the overall returns earned on the stock market. 
   
• Lastly, real estate is also sometimes used in this way - while not every investor chooses to buy physical property, it’s often considered to be a stable, long term investment. 

Gold hit fresh record highs! Here’s why.

Recently, gold has reached some very high spot prices. After much speculation of whether it would exceed $3,000, gold finally breached that price on March 14. It then briefly rose above the $3,160 level shortly after President Trump’s “liberation day” tariffs announcement on April 3rd. Some investment bankers like Jeffrey Gundlach believe it could continue to rise to reach $4,000, although likely not this year. 

Reasons for the high prices of gold lately include geopolitical conflict and uncertainty, with war and tensions in Ukraine and the Middle East. Before the new highs in 2025, gold was already reaching high prices in 2024. Part of the reason for this was central banks increasing their stocks of the precious metal - last year, for the third year in a row, central banks purchased over 1,000 tonnes of gold. 

U.S. President Trump’s tariffs are also an influence, driving market volatility that sends traders flocking to assets they feel they can rely on. The U.S. has recently seen a very high demand for physical gold which might also be partly attributed to uncertainty around the effects of the tariffs. According to the World Gold Council, by February 27 more than 600 tons of gold had been imported into the country since December 2024. 

How is gold priced?

You can find a dizzying array of gold prices, depending on the product, quantity, or location. Visit your local jeweler and you might find a different price for gold than what you might find online as quoted by brokerages, exchanges, as well as various authorities in China, India, and the UK.

To get a holistic sense of whether gold is moving up or down overall, the price of 1 troy ounce gold quoted in U.S. dollars (XAUUSD) is used as the worldwide benchmark. XAUUSD is also the most popular price that retail traders, investors, and the media refer to when talking about gold.

So, when you see headlines saying that “Gold hits new record highs above $3,000”, that means 1 troy ounce of gold now costs over $3,000.

Of course, gold can also be valued in other currencies, such as euros, British pounds, Australian dollars, Japanese yen, Chinese yuan, and many more.

Much like how Forex currency pairs are traded, traders can take advantage of unique market opportunities by trading gold against major and exotic currencies.

Here are several of the gold crosses available to trade with Alpari:

• XAU/AUD: Gold against the Australian dollar
   
• XAU/JPY: Gold against the Japanese yen 
   
• XAU/CNH: Gold against the Chinese yuan 
   
• XAU/GBP: Gold against the British pound

Gold and other precious metal currency crosses enable traders to easily diversify their portfolio, by including a variety of different combinations. Traders can benefit from the safe haven status of gold at the same time as strengthening their resilience with a diverse range of trades.

Another advantage of gold currency crosses is that traders can take advantage of the differing economic and currency performances around the world to make a profit. 

Imagine a scenario where demand for both gold and the U.S. dollar is strong. Such conditions make it tougher for gold to keep rising against the stronger USD - for example, XAUUSD may only climb slowly.

On the other hand, if during this same period, the Japanese economy is weakening and demand for the yen is waning, gold then has an easier task climbing against JPY, meaning that XAUJPY can climb faster than XAUUSD.

And that’s exactly what happened in 2024, with XAUUSD (gold vs. US dollar) climbing “only” 27%, while XAUJPY (gold vs. yen) soared 42%!

Each cross offers different advantages and traders should be aware of what is happening in the local economy regarding gold when considering trading gold crosses on the Forex market. Trading the right pair at the right time is highly important. 

Looking ahead, the U.S. dollar is expected to weaken if a US recession becomes likelier this year, with the world’s largest economy potentially bearing the brunt from the Trump-led global trade war.

If the U.S. dollar continues wilting in the months ahead, that could make it easier for XAUUSD to keep soaring in 2025, relative to other G10 currencies that have been more resilient.

Already, gold has had an easier time climbing against the weaker US dollar so far in 2025 (XAUUSD up 18%) while the likes of XAUEUR and XAUJPY have “only” managed a 9% year-to-date climb.

Portfolio diversification with gold crosses

There are also a number of other ways to trade or invest in gold, which offer different advantages and drawbacks. 

Purchasing physical gold bullion such as bars and coins appeals to many investors due to security and aesthetic appeal, but it can be costly to safely store and insure large amounts of the metal. 

Trading based on the spot price of gold is also possible through derivatives like gold futures, or gold as a CFD, or even ETFs. These instruments offer traders and investors a way to profit based on price changes without actually owning any gold themselves. 

Conclusion

While many traders pursue a long-term strategy when investing in safe havens, of course it is also possible to aim for short-term profits - for instance, when trading gold as a CFD and speculating on a rising or falling spot price, or when trading a currency against the Swiss Franc. 

However, safe havens like precious metals are perhaps most popular as part of a long-term strategy, particularly given their ability to help protect an investors’ capital during periods of market instability, which could be years long. During these periods, the value of safe haven assets might even increase.  Safe haven assets are also less volatile and less prone to wild price swings on a day-to-day basis. 

Traders and investors who are interested in safe haven assets including gold, silver, and currencies can find out more on our trading platform. Those who are keen to learn more about Forex trading can set up a demo account with us and develop their understanding of this exciting way to trade.  

Disclaimer: Trading is risky.