Safe-Haven ETFs Ahead of the Fiscal Cliff

Senate Budget Committee Chairman Kent Conrad,  North Dakota Democrat, believes lawmakers will come to a “framework agreement” on tax and spending to create a broad deal next year, reports Laura Litvan for Bloomberg. Senator Bob Corker, Tennessee Republican, also agrees that there is little chance of automatic policies kicking in and that Republicans are open to compromise.

“I absolutely believe there is room for agreement,” Conrad said in the article.

Nevertheless, investors have kept an eye on Treasuries heading into the fiscal cliff as the ultimate safe-haven asset. Currently, the benchmark 10-year Treasury notes are yielding about 1.60%. [iShares : A Bond’s-Eye View of the Fiscal Cliff]

  • iShares Barclays 7-10 Year Treasury Bond Fund (NYSEArca: IEF)
  • iShares Barclays 20 Year Treasury Bond Fund (NYSEArca: TLT)

Similarly, the U.S. dollar has been strengthening as global investors take a greater interest in U.S. Treasuries – international investors would have to exchange their domestic currencies for greenbacks and the greater demand would help the U.S. dollar appreciate.

  • Powershares DB US Dollar Bullish Fund ETF (NYSEArca: UUP)

While the U.S. dollar and gold have traditionally moved in opposite direction – a weaker dollar makes it cheaper to buy U.S.-denominated gold overseas, gold could maintain its safe-haven status going into the fiscal cliff. [Gold ETFs Rise on Safe Haven Demand Despite Stronger Dollar]

“The gold price is up because of a combination of the outlook for an expansionary U.S. monetary policy and fears over the ‘fiscal cliff’,” Eugen Weinberg, global head of commodities research at Germany’s Commerzbank, said in a Reuters article.

  • SPDR Gold Trust (NYSEArca: GLD)
  • iShares Gold Trust (NYSEArca: IAU)

For more information on the current events, visit our current affairs category.

Max Chen contributed to this article.