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Safe Haven Assets Are Weakening

The trading week is coming to an end. During the past week investors have clearly shown 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 lead to some safe haven asset interest.

Though Reuters mentioned today’s safe haven rally 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.

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 Japense 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.

Meantime, the dollar is trading sideways. It is trading between 98.50 and 101 points for two months now.

This weakness in safe haven assets 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” saying … they still have three trading weeks left.

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