Safe Haven ETFs in Focus Amid Geopolitical Threats

North Korea has been relatively silent for two months. Safe haven funds were out of investor radar. However, they are back in reckoning as the North Korean leader made claims of his regime completing its nuclear program.  

Latest Developments in the Space

North Korea launched a Hwasong-15 missile with improved technology that can put the entire United States within range, per Korean Central News Agency (KCNA). Per United States Secretary of Defense James Mattis, this missile flew higher than any previous missile.

Despite widespread global criticism, North Korea has been continuously testing missiles to develop a nuclear program in order to safeguard itself from potential U.S. invasion, per North Korean leader Kim Jong-Un. North Korea seems to be anything but willing to scrap its nuclear program, as it broke its two-month-long period of silence by testing a missile that reached an altitude of more than 4,000 kilometers.

South Korea responded with its own missile test in a show of force within minutes of the launch. Moreover, North Korea was recently added to a list of nations that the United States considers sponsors terrorism. The Asian nation strongly condemned this action.

This came as President Donald Trump enacted new sanctions aimed at North Korean shipping to put further pressure on the country to abandon its nuclear program. However, North Korea responded by saying that they will continue to work on the nuclear program amid continuous sanctions by the United States.

Let us discuss a few ETFs impacted by the rising geopolitical risks relating to North Korea (see all Currency ETFs here).

Japanese yen funds are the go-to investment vehicles in periods of rising risks. Although Japan’s proximity to North Korea creates doubts over its reliance as a safe haven currency, its significant foreign asset position makes it a good bet. Moreover, yen’s track record of safeguarding investors from global risks may also be a factor for its current relative appeal (read: Safe ETFs Win on Fed Minutes).

CurrencyShares Japanese Yen Trust FXY

This ETF seeks to provide exposure to the Japanese yen.

It has AUM of $112.1 million and charges a fee of 40 basis points a year. It has returned 4.4% year to date and 1.1% in a year (as of Nov 28, 2017). As such, FXY carries a Zacks ETF Rank #3 with a Medium risk outlook.

CurrencyShares Swiss Franc ETF FXF

This ETF seeks to provide exposure to the Swiss franc.

It has AUM of $148.7 million and charges a fee of 40 basis points a year. It has returned 2.4% year to date and 1.8% in a year (as of Nov 28, 2017). As such, FXF carries a Zacks ETF Rank #3 with a High risk outlook.

Gold has been gaining on rising concerns relating to North Korea as well as Saudi Arabia. Earlier this month, Saudi Arabian crown prince Mohammed bin Salman looked to tighten his grip on power by ordering a crackdown with arrests of royals, ministers and investors. Saudi stocks suffered as a result of this and introduced uncertainty in the markets, driving demand for safe havens like gold. Salman’s crackdown on corruption and war-related tensions with Iran led to investor pessimism and hit the stock markets.

SPDR Gold Shares ETF GLD

This fund offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses.

It has AUM of $34.9 billion and charges a fee of 40 basis points a year. It has returned 12.0% year to date and 9.1% in a year (as of Nov 28, 2017). As such, GLD carries a Zacks ETF Rank #3 with a Medium risk outlook.

iShares Gold Trust ETF IAU

This ETF seeks to provide exposure to prices of the gold bullion and can be used as a means to attain portfolio diversification or achieve hedging targets.

It has AUM of $10.0 billion and charges a fee of 25 basis points a year. It has returned 12.2% year to date and 9.3% in a year (as of Nov 28, 2017). As such, IAU carries a Zacks ETF Rank #3 with a Medium risk outlook.

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GOLD (LONDON P (GLD): ETF Research Reports
 
ISHARS-GOLD TR (IAU): ETF Research Reports
 
CRYSHS-SWISS FR (FXF): ETF Research Reports
 
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