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Investors are rushing to liquidate their holdings of risky assets, but where are the havens?

With U.S. Treasuries now yielding rates lower than inflation, investors seeking the best safety available are now essentially paying the U.S. government to take their money.

That's why a number of other asset classes are soaring these days. Gold hit a new high on Thursday, topping $1,820 (U.S.) an ounce, as both retail investors and governments around the world continued to bulk up on bullion.

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Central banks purchased 69.4 tonnes of gold in the second quarter alone, which was more than four times the amount they bought in the same period a year earlier, according to the World Gold Council. Exchange-traded funds (ETFs), which several years ago opened the door for retail investors to trade in precious metals, purchased 51.7 tonnes of gold between April and June, significantly above the quarterly average of 41.4 tonnes of the previous three years, the council said.

A select group of foreign currencies have also won haven status among investors lately. In Switzerland, the government has intervened to try to force its currency down to a more reasonable level after the Swiss franc rose 13 per cent this year. The move briefly halted the rise, but on Thursday the Swiss franc continued to rack up gains against most other major currencies, including the U.S. dollar and the euro.

A handful of ETFs now make it easier for retail investors to play currencies, from the New Zealand dollar to the Brazilian real and the Chinese yuan. Currencies are often viewed as speculative investments because they are not productive assets like stocks, which represent the production of goods and services. Also, in a currency trade, one person's gain is another person's loss.

But Michael Rawson, an ETF analyst with Morningstar Inc., says a diversified portfolio of currencies actually has a quite low volatility and has a legitimate place in investment strategies.

"In this time of elevated macroeconomic risks, currencies should be viewed as a diversifier and as a low-risk asset," he says.

Among currency ETFs trading on the New York Stock Exchange, there are several different structures. Rydex Specialized Products LLC's CurrencyShares ETFs purchase foreign currencies and hold them in a bank account. On the other hand, Invesco PowerShares Capital Management LLC's ETFs track futures indexes using derivatives.

Both are legitimate approaches, Mr. Rawson says. The most appealing products are those that hold a diversified basket of currencies because they have less volatility than single-currency ETFs, he adds. WisdomTree Funds, for example, offers an ETF of emerging market currencies. The WisdomTree Dreyfus Emerging Currency ETFfund has a 0.55 per cent expense ratio and has returned 7.2 per cent over the past 12 months.

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Many investment professionals say one of the best havens at the moment is cash.

"Cash is not trash. It's an option on the ability to buy after this correction plays out," says Danielle Park, president and portfolio manager at Venable Park Investment Counsel Inc.

"We still think high-quality bonds, U.S. T-bills and cash are the right place to be at this time. That allows us to avoid the ongoing bear market in stocks and commodities. It also gives us liquidity to step in and start buying when every one else is panic selling," she says.

That buying opportunity could come in the next few months, she adds.

Ms. Park is cautious about gold at the moment. She says the Canadian dollar tends to lead gold downwards during price declines. The loonie has lost about 5 cents (U.S.) during the past month.

"We are thinking gold will very likely correct with other risk assets, if our thesis is confirmed that we are now entering into the next recession in the global economy," she says.

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"Keep it simple," advises Adrian Mastracci, president of KCM Wealth Management Inc. "This market is one or two data releases away from the toilet, or from a rock and roll rally again."

In these tenuous times, he favours a basket of GICs, corporate bonds and dividend-paying stocks as a means to cut volatility.

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