Safe Haven - security tools in financial markets. Alexander Sivtsov. - Ester Holdings

Safe Haven – security tools in financial markets. Alexander Sivtsov.

This article deals with those tools in which investors prefer to invest in an unstable situation in the global financial markets for profit or just to save their money.

Safe Haven

Safe Haven – a term widely used by investors working in global financial markets. The term means those financial instruments with the help of which you can make a profit during crisis situations in financial markets. The main requirement for such instruments is a high level of liquidity and stability.

The term “ Safe Haven” originated in the 1930s in the United States during the Great Depression. At this time, investments fell 4 times, and those who had some capital were looking for a place to save it. It was in those years that the phrase “safe haven” sounded for the first time and acquired the meaning of the exchange term.

Japanese yen

Recently, the Japanese yen has become the most popular security instrument in the foreign exchange market. The Japanese economy is the third largest economy in the world and it is one of the reasons for the confidence in the Japanese yen. Also, the volume of Japanese investment in assets of other countries far exceeds the volume of foreign investment in the Japanese economy. The reason for this situation is the ultra-low discount rate of the Bank of Japan -0.1%, that allows to take profitable loans in yen for investment. In turn, investors sell assets and return funds to the original market when a tense situation arises in financial markets. It leads to a stronger yen.

Swiss frank

The Swiss franc is one of the most overvalued currencies in the world, compared to its state of the economy. Franc’s specific feature is the course, that weakly influenced by fundamental data. The situation with the franc is based on the fact that there is no significant change in the Swiss economy. Switzerland’s GDP growth is rather slow, but sure. In foreign policy Switzerland takes a neutral side and does not take part in international conflicts. This fact also inspires confidence in investors. In addition to the above arguments, Switzerland, as well as Japan, is one of the largest lenders in the world and it makes the Swiss franc an excellent security tool.

Gold

Gold is an instrument of the commodity market, but since ancient times precious metal has been the most solid and liquid currency in the world. Gold reserves are small, so yellow metal was smelted and accumulated by mankind from the very beginning of mining. Gold is one of the most valuable minerals in the world. Also, gold is widely used in various industries and with the development of technology the use of metal will only grow. On this background gold will not significantly fall in price. Therefore, it is a preferred instrument of a “safe haven” in the midst of world crises.

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Alexander Sivtsov

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