Safe-haven assets soar amid stirring tensions between Russia and the U.S.
Safe-haven assets surged on Tuesday after a warning from Russia over its updated nuclear doctrine, which indicated inevitable retaliation for any attack on the country or its allies. This comes after the administration of Joe Biden reportedly authorised Ukraine to fire American missiles deep into the Russian territory.
In reaction to the heightened geopolitical risk, investors flocked to government bonds, the Japanese yen, and gold, following comments from the Kremlin that Russian President Vladimir Putin approved the updated doctrine.
“Typical risk-off move in forex following the headline,” said Athanasios Vamvakidis, global head of forex strategy at Bofa, referring to the reaction to the Kremlin statement.
“The market has been complacent on geopolitical risks, focusing on other themes,” he added.
German government yields dropped as much as 8 basis points on the day to 2.292% DE10YT=RR, while gold hit a session high around $2,626 an ounce and the dollar sank as much as 0.9% against the yen to 153.28 JPY=EBS.
An index of European aerospace and defence stocks (.SXPARO), which had initially dropped 0.6%, recovered some ground and ended the day with a loss of 0.2%.
Investors are also waiting for the euro area’s negotiated wage figures due on Wednesday and regional purchasing manager surveys on Friday, which could be crucial for the European Central Bank decision in December.
Safe haven assets are investments that are expected to retain or increase in value during times of market turbulence, economic uncertainty, downturns, or geopolitical instability. They are considered low-risk and typically include assets like gold, U.S. Treasury bonds, and other government-backed securities, which tend to perform well when other markets are volatile or declining.
