Rising geopolitical tensions prompt buying of safe haven assets: Gold, Silver and Swiss Franc

Events in the Middle East are steaming ahead by the hour, though not necessarily in the right direction.

In executing Operation ‘Midnight Hammer’ over the weekend, the US had acted in the belief that some Iranian facilities were building destructive weapons. The latest military strikes in Iran, which were partly carried out with the powerful GPU-57 bombs (each weighing 30,000 pounds), marked the latest chapter in America’s involvement in the region again. After the air attack, Iran accused the US and Israel of crossing a ‘very big red line’.

‘President Trump,” opined one Financial Times columnist on the latest military escalation “has opened a Pandora’s box.” Indeed. One retaliation move by Iran on Sunday was to close the Strait of Hormuz. Note this: one-fifth of oil supplies pass through this strait.

Earlier in the month, I highlighted the potential reaction in the energy sector following an intense exchange of missiles between Israel and Iran. This time, it appears that the reaction will be more explosive. Oil prices predictably surged in early hours on Monday. But strangely, this rally ran out of steam during the rest of the session. Prices tumbled to five-day lows, a drop that affirmed – for now – the downward-sloping resistance trendline.

Are investors not concerned about oil supply then? They are. But they also remember the unpredictability of the situation. The latest headline to hit news outlets (on 24 June) is: Israel-Iran agree ceasefire.

The surge in geopolitical tensions has renewed interest in buying gold. The yellow metal was drifting sideways before finding support right at the rising trendline (see below). The Israel-Iran military conflict may lead to an upside breakout here. If successful, gold’s advance may progress all the way to $3,600 since there is no identifiable chart resistance apart from round-number levels. $4,000 per troy ounce of gold may, seemingly, not sound that far-fetched anymore. Silver may, too, take out the $40 level on a sustained gold rally.

Platinum is another interesting metal to monitor as prices have exploded upwards in recent weeks. Another leg up from here is possible as it plays catch-up to gold and silver.

 

The third safe-haven asset that investors are buying is the Swiss Franc. CHF is one of the few currencies that is benefitting from the current political turmoil globally.

Veterans of financial markets will know that the Franc is a highly desirable currency in times of market stress. In 2011, it appreciated so much that the Swiss National Bank had to intervene repeatedly, costing billions, to cap CHF’s strength. More than a decade later and without many alternatives, the Franc’s role of a ‘safe-haven currency’ remains undiminished. As a matter of fact, CHF has strengthened in recent days even though the SNB already slammed the policy rate to zero this month. A return of Zero Interest Rate Policy!

Against the USD, CHF broke the 0.840 floor decisively in April. A subsequent rebound affirmed that level as resistance. The path of the least resistance here seems to point south, another probe at the major psychological support at 0.80 is likely (see below). Against JPY, CHF broke out this week to new long-term highs.

 

Will the Federal Reserve lower interest rates?

The fourth safe-haven asset could be US Treasuries.

Why, you may wonder? Aren’t US assets being sold (or diversified) after Trump’s reciprocal tariffs? True. Portfolio adjustments are taking place in the FX market every day that chip away USD’s long-term financial strength.

But US Treasuries appear to have found some support in recent weeks. Interest rates are seemingly capped as investors slowly dip back into the asset class. One catalyst for this rotation is lower-than-expected inflation data.

Economics aside, President Trump is waging a highly personal war on the Federal Reserve. The commander-in-chief, for the last few weeks, has been exerting increasing pressure on the Fed chair Jerome Powell (who was appointed by Trump himself back in 2017) to lower interest rates. This is what Trump had to say about the Fed chairman just last week:

I don’t know why the Board doesn’t override this Total and Complete Moron! Maybe, just maybe, I’ll have to change my mind about firing him? But regardless, his Term ends shortly!   – President Trump, TruthSocial.com (20 June 2025)

The attacks are increasingly vocal and direct. In other words, the days of Powell leading the Federal Reserve are predictably numbered. Tied to this issue is the growing opposition to holding the Fed Funds rate at the current level (at 4.25-4.50 percent).

In the latest Fed ‘Dot Plot” released in June, many FOMC members are expecting to hold rates around 4 percent for 2025, before dropping rates next year (see below). The reason for this holdout is clear: Trump tariffs. High import duties may lead to a spike in price inflation. Few trade agreements have been made so far.

But some Fed members argue that this tariff price shock has not emerged. Fed Governor Christopher Waller, for example, sided with the view that interest rates should come down. The tariff shock to inflation, he highlighted, has failed to come through. Another governor, Michelle Bowman, has indicated that interest rates may be dropped in July if CPI numbers continue to stay low.

Taken together, it seems like the Fed could be on the cusp of a policy change, one that leads into a more accommodative rate regime.

Source: Federal Reserve (June 2025)

A contrarian bet on US government bonds?

These developments imply that US Treasuries may benefit from the above trend.

iShares Long Maturity US Bonds (TLT), for instance, has affirmed long-term support near 82.0. Backed by this floor, a medium-term rally back to the nineties is possible (see right). Given that expectations of US bonds are currently low, any positive revisions here may lead to substantial price increases.

Bond bears, however, argue that any price rebound here would be temporary. Just look at the long-term price trend (of TLT): bearish and still stuck near the floor. Yes, inflation is back to levels where the Fed could contemplate cutting rates. But other structural factors, like tariffs, remain staunchly unresolved.

I concur with some of this sentiment. To attract buyers back to the asset requires a strong price rebound – one that would cause bond bears to sit up and take notice. For now, keep an eye here. As soon as these upward dynamics start showing, I’d be prepared to dip back in.