IMF: Bonds are losing their role as a safe haven – gold is taking over

The traditional investment rule of a portfolio with sixty percent shares and forty percent bonds is under pressure. According to the International Monetary Fund, bonds are losing their historic role as shock absorbers, while gold and silver are emerging as new stabilizing forces within portfolios.

Historical relationship between stocks and bonds is crumbling

Since the corona pandemic, shares and bonds increasingly move in the same direction during periods of market stress. Where government bonds used to rise when shares fell, investors now regularly see simultaneous price losses. This means that one of the most important foundations of modern portfolio management is disappearing.

For decades, pension funds, insurers and so-called risk-parity strategies could rely on the negative correlation between shares and government bonds. That relationship ensured that losses in stock markets were partially offset by rising bond prices.

According to the IMF, this pattern has structurally weakened since the end of 2019 and further accelerated during the pandemic. In recent corrections, both asset classes fell at the same time, amplifying rather than dampening losses. This increases volatility and can force institutions to reduce positions at unfavorable times.

The causes lie in a combination of factors: rising government debts leading to additional bond issuance, higher inflation than central banks’ target and changing monetary policy frameworks. As a result, government bonds function less well as a safe haven.

Rise of gold, silver and other alternatives

Now that traditional protection is declining, investors are actively looking for alternatives outside the traditional financial system. Precious metals catch the eye. The price of gold has more than doubled since the beginning of 2024, while silver and other metals also showed strong increases. Bitcoin is unfortunately still lagging behind in this regard.

This shift is part of a broader trend of scarce, non-sovereign assets becoming more attractive in a world of high debt and uncertain monetary policy. Currencies such as the Swiss franc also benefit from this search for stability.

Yet the IMF states that simply switching to alternative investments is not a panacea. Raw materials and private assets also have their own risks and volatility. According to the fund, the real solution lies with credible fiscal and monetary policies that restore confidence in government bonds.