Stock Market Safe Havens in a Time of Crisis

It’s been all about Greece and Italy this month. The markets have been fixated on this daily drama as volatility became commonplace.

We’ve never seen anything quite like this. But the world economy hangs in the balance, and that’s why it’s so important.

Overall, gold, bonds, and the US dollar continue to be the main safe havens, so stay with them. As for stocks, they rose strongly this month, but they’re still mixed and high risk, and we’re staying on the sidelines.

Metals, Energy, and Resources
The precious metals, oil, and some of the resource sector bounced up this month, following September’s fallout. Gold jumped back up to the high area as safety came to the forefront with the ongoing crisis in Europe.

Gold is holding up firmly, just as it has over the last three years. But for the sake of buying on weakness, if gold fails to reach record highs this month or next, a decline is still a good possibility.

Our same strategy continues -- buy gold coins, bars, and ETFs gradually to take advantage of any weakness. We think the bull market is solid, and it really has everything going for it. Keep your positions.

Silver held at its major support, and it’s bouncing up from an extreme low area. We have been advising to take advantage of this weakness to buy more silver coins, bars, and ETFs.

Also continue to keep our recommended gold and silver shares, some of which include Royal Gold (RGLD), iShares Comex Gold Trust (IAU), SPDR Gold Shares (GLD), Central Fund of Canada Limited (CEF), iShares Silver Trust (SLV), and Silver Wheaton (SLW). If you have others that are doing well, stay with them.

We'll wait a while before recommending the energy and resource sector in general. While the oil price is jumping up nicely, the sector as a whole is still on the fence along with the world economy.

Stocks
The market jumped up this month, but it’s not out of the woods. The market is facing many negatives -- it’s volatile and mixed, moving in tune with events in Europe.

Risk remains high and anything could happen, so caution is still warranted. That being the case, we think it’s best to stay on the sidelines.

Stocks could decline in the weeks ahead, but if the market holds up overall, that’ll provide a good buying opportunity. If not, we’ll be glad we maintained our stand aside position.

Currencies
The currency markets were clearly affected by events in Europe as well. As you’d expect, the euro was especially sensitive, rising and falling on the news of the day, taking the other currencies with it.

The markets were volatile, and the US dollar eventually came out on top. It remains a better alternative, and it’s hanging on to its safe-haven status. Plus, the US dollar now has an interest rate advantage.

Currently, the currencies are mixed, but if the euro stays below $1.38, it’ll be a bad sign for all of them. We suggest you continue to keep your cash in US dollars or buy the US Dollar Bullish Index (UUP) or both.

Interest Rates and Bonds
The bond market has been volatile and jumpy, also reacting to the news of the day. But all things considered, US bonds are still an important safe haven, and they’re bullish. When events in the eurozone intensified, bonds rose sharply, driving interest rates down.

Consider keeping the bonds you have, as well as SPDR Barclays Capital Long Term Treasury ETF (TLO), and selling American Century International Bond (BEGBX), as it’s poised to decline.

For new buyers, we would wait before buying bonds because the market is overbought, meaning a downward correction is likely in the weeks or months ahead. That’ll provide a better opportunity to buy at a better price.

Editor's Note: This article was written by Mary Ann and Pamela Aden of The Aden Forecast.

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