The price of gold has increased by about 40 per cent in the past year. As a result, some analysts have recommended a higher-than-usual allocation to bullion, and central banks have responded by boosting their gold reserves. REUTERS/Edgar Su/File PhotoEdgar Su/Reuters
In times of geopolitical unrest and economic uncertainty, few assets offer real capital protection.
Traditional safe havens include select fiat currencies, government bonds and precious metals such as gold, which are valued for their ability to retain or increase value during periods of international conflict. But not all safe havens are created equal.
Some havens, such as the U.S. dollar and debt instruments such as government bonds, rely on a nation’s economic and political strength. Others, such as gold, tend to perform independently of centralized systems.
Currently, old assumptions about havens are being tested, and understanding the nuances of each can help investors decide which haven is most suitable for their portfolios.
Debt, broken diplomacy boost gold
One of the most exciting developments for investors over the past few years has been the performance of gold. Over the past 12 months, the price of gold has increased by about 40 per cent. That has been driven by persistent geopolitical tensions, from China’s economic slowdown to the recent Middle East conflict. As a result, some analysts have recommended a higher-than-usual allocation to bullion, and central banks have responded by boosting their gold reserves, looking to the haven as an alternate source of security.
The World Gold Council reported that central banks added a combined 1,037 tonnes of gold to reserves in 2023, before gold’s rally even took off, with Asian buyers such as India and China accounting for 60 per cent of the purchases.
While some saw this as panicked capital in flight, others called it strategic preparedness. Nonetheless, the purchases signal concern over the reliability of other assets and a clear pivot toward stores of value outside the traditional Western financial system.
What makes gold so valuable is that it can’t be printed or easily manipulated by monetary policy. It has maintained its reputation as a store of value for thousands of years. Additionally, its finite supply supports long-term price stability, making it a strong hedge against inflation, currency devaluation and systemic risk.
U.S. dollar dominance no more?
Since the Bretton Woods agreement in 1944, the U.S. dollar has been the dominant safe-haven currency, but cracks are forming. Shakiness in the U.S. political and economic landscape, combined with its growing involvement in global conflicts, has eroded investor trust in the U.S. dollar.
In 2025, the U.S. dollar posted its worst first-half performance since 1973, falling by more than 10 per cent. This decline is being driven by unchecked fiscal expansion and deepening geopolitical tensions due to the introduction of new tariffs, the U.S.’s ongoing involvement in the war in Ukraine, which entered its fourth year, and a growing loss of faith in U.S. leadership.
The devaluation of the U.S. dollar signals a breakdown in the old world order. As a reflection of this belief, central banks have begun to rebalance their reserves with fiat currencies from more stable economies such as Japan and Switzerland.
Bond(ing) with equities
The U.S.’s macroeconomic challenges have created a spillover effect that’s playing out in the U.S. Treasury market, the largest and most liquid bond market in the world. While Treasuries have long held safe-haven status because of their historically inverse correlation with equities, that relationship is weakening.
Over the past few years, the Treasury market has been acting in more of a lockstep movement with the equities market, particularly during periods of market stress. This unusual behaviour has undermined Treasuries’ role as a portfolio stabilizer and raised questions among institutional investors about their structural reliability. Like the U.S. dollar, U.S. Treasuries remain a refuge, but compared to gold, they’re underperforming as a safe-haven asset.
What this means for investors
As we look to the future, safe-haven assets will continue to serve as a crucial cornerstone in investor portfolios. They’re essential to ensuring portfolio protection and reducing capital depreciation in times of instability.
However, as the old world order begins to change, the definition of “safe” is changing with it. Understanding global power shifts, inflation trends and the fragility of the systems that once guaranteed stability will bring confidence and clarity about which havens can offer true protection.
Blake Mclaughlin is vice-president of exploration at Axcap Ventures Inc., a Vancouver-based investment company focused on gold.