Why is gold a safe haven?
The simple answer is that it has worked in the past. Based on past experience in a crisis, people believe in the safe haven feature of gold and it works because they believe in it.
Gold has been used since ancient times as a store of value. Helping it achieve this status is its aesthetic appeal, malleability (with a relatively low melting point making it easy to produce coins or jewelry), virtual indestructibility (almost all the gold that has ever been found or mined is still around), and, most importantly, a rarity. Though hundreds of thousands have dug and panned for it over history, the amount of gold mined has never been enough to devalue it.
‘Nobody understands gold prices’
Gold may also be a safe haven because it is simple and well-known, the first thing that comes to mind when investors are faced with extreme uncertainty.
This apparent simplicity, paradoxically, does not mean easy-to-understand gold prices.
Some factors influencing its price are tangible, such as physical supply and demand.
But many factors influencing gold’s price are less tangible, such as changing perceptions, preferences and market sentiment.
As then US Federal Reserve chairman Ben Bernanke said [removed] : “"Nobody understands gold prices, and I do not pretend to understand it either.”