Gold rose on Thursday as the escalating conflict in the Middle East prompted investors to seek safe havens, while a weaker dollar also supported prices. Photographer: Damian Lemanski/Bloomberg via Getty Images
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When markets rally, investors often know where to hide: US Treasurys, the Japanese yen and gold.
But in 2026, that playbook didn’t work as expected. Treasury yields have risen since the start of the Iran war, the yen has weakened to a ten-year low against the dollar, and gold has fallen sharply from its January peak.
The reason, strategists say, is that this is not a classic episode of risk-taking. Fears of inflation, high real yields, financial worries and a wide interest gap are increasing the general need for safety – while investors continue to chase gains in AI-connected stocks.
Frederic Neumann, chief Asia economist at HSBC, told CNBC that risk appetite remains healthy and global financial conditions are very supportive.
US markets, along with some in Asia, have been hitting record highs as investors pile into AI-related names such as Nvidia again Intel stateside, too Samsung Electronics, SK Hynix again Taiwan Semiconductor Manufacturing Company in Asia.
His view is supported by Henning Potstada, global head of bulk goods at goods manager DWS.
“The driver of equities is EPS growth, the only driver that matters over time in terms of metrics, and EPS forecasts are going up,” Potstada told CNBC.
Bonds and inflation
With all the uncertainty in the political landscape currently swirling around, bonds haven’t seen a move to safety due to two factors: inflation expectations and credit stabilization.
DWS Postada explained: “We had the Iran war, which led to the closure of the Straits of Hormuz, [and] led to oil prices going from $60 to $120, leading to inflation forecasts, or in fact, inflation appears to be rising, and this is a situation where bond markets are not driven by growth but driven by expected inflation.”
Rising inflation expectations generally make bonds less attractive, as they erode the purchasing power of future fixed interest payments, causing current bond prices to fall.
In terms of credit stability, despite strong investor confidence in Treasuries, the US sovereign deficit has caused some concern.
Last year, Goldman Sachs vice chairman Rob Kaplan said: “We’ve always talked about the deficit, but we’re benefiting from a bigger debt base than we’ve had in our lifetime.”
At the time, Kaplan said the proposed $2 trillion national budget, about 6-7% of GDP, is historically high without a recession.
However, the actual numbers were lower. The US is on track to run a federal budget deficit of about $1.9 trillion, or 5.8% of GDP, in fiscal year 2026 according to the Congressional Budget Office.
Gold does not shine
As for gold, while the yellow metal has traditionally been sought after by kings and poor alike throughout history, the anemic gold price has confounded experts.
Billy Leung, investment strategist at Global X ETFs was unequivocal. “Gold has not behaved like a pure safe haven lately.”
“Weighed down by a strong USD and high real yields, which tend to dominate its price action even during periods of volatility,” he added.
Although DWS’ Postada also acknowledged that gold price action was “unusual,” he thinks this may be due to the flow of sales and acquisitions.
He pointed out that many retail investors piled into the gold market during the rally last year, and now the volatility is largely driven by this “quick money.”
“Structurally, we still think gold is a safe haven,” he added.
Yen on the way out
When asked about Yenexperts were more skeptical. The divergence in the Bank of Japan’s policy approach, the stabilization of Japan’s debt, and the weakening of the currency have led some to suggest that the yen may not be the safe haven it used to be.
Rising interest rates usually strengthen the currency, but despite the Bank of Japan raising its policy rate to a 30-year high, Japanese government bonds hitting record highs, and a $74 billion intervention, the coin weakened to a ten-year low against the dollar.
As of July 3, the yen was hovering around the 162 level against the greenback.
Tokyo’s GDP-to-GDP ratio stands at a staggering 204.4% by 2026, according to the International Monetary Fund, the highest in the world.
“The yen has been less reliable given the policy divergence with the Bank of Japan and its sensitivity to differential exposure,” Leung said.
Safe zones, in other words, have not disappeared but have become less predictable. Instead of rising together whenever markets are volatile, Treasuries, gold and the yen are increasingly responding to their larger bases.
For investors, that means the old disaster playbook may no longer be enough, and building resilience may require a broader mix of assets than betting on a single safe haven.
