Mapping COVID-19's Impact on "Safe Haven Asset Classes"

Periods of economic uncertainty often coincide with a "flight to quality" as investors move their capital away from riskier investments and into safe haven assets. The ongoing COVID-19 pandemic has had an unprecedented impact on the global economy, providing a prime example of this phenomenon. 

In this analysis, we examine the trading behaviour of gold and US treasuries, two of the most well-known safe havens, over the course of 2020 as events unfold around the COVID-19 outbreak. We consider four key metrics of trading behaviour to quantify the market sentiment around key events: price, traded volume, volatility and spread.


The prices of these securities rise as uncertainty sets in, and fall as government and central banks respond to ease investor concerns. The period from the beginning of the year to mid-March saw a steady rally in gold and treasury prices, 8% and 10% respectively on LSE, as the severity of the outbreak became more apparent. This was immediately followed by a precipitous decline in prices of both assets as the World Health Organization officially declared a global pandemic on 11th March, and governments and central banks around the world announced extraordinary remedial action to alleviate investor concerns. This same period saw surges in traded volume of these securities across both of the exchanges examined here, due to increased investor interest in such assets as a means of de-risking portfolios in light of elevated market risk. The combination of heightened risk in the wider macroeconomic environment and increased trading in these particular securities resulted in huge spikes in volatility, peaking at levels up to 10x greater than we would typically see in regular circumstances. Such tumultuous trading action was met with caution from market makers, causing spreads to widen, in some cases over 20x greater than the long-run average. As would be expected, the behaviour observed is very similar across the venues.

The BMLL Team has produced an interactive timeline of events since the beginning of 2020 showing the trading behaviour of gold and US treasury exchange-traded products. The first visualisation shows this for the London Stock Exchange and the second shows this for NASDAQ; from this we can draw parallels between trading behaviour in Europe and the US.

The plot is interactive, allowing users to hover over bubbles on the COVID-19 plot for descriptions of key events.

Sources: 2019 Novel Coronavirus COVID-19 (2019-nCoV) Data Repository by Johns Hopkins CSSE; BMLL Data.