Early September gains in traditional safe-haven assets may be boosted by investor fears that terrorists would attempt a repeat performance on that anniversary date, says CIBC World Markets. “If so, fixed income markets, oil, gold and the Swiss franc could each see a bit of a retreat should that sombre day pass without incident.”

However, CIBC WM predicts that safe-haven assets may remain attractive for a while after the anniversary of the attacks. “From the Middle East to Latin America, there are still plenty of political and economic hotspots that could flare up in the coming quarters, with significant consequences for financial assets. In fact, the Bank of Canada specifically cited the unsettled geopolitical situation as one of the factors behind its decision to forego a rate hike in September.”

It’s clear that the Bush Administration is committed to taking Saddam out, one way or another, say bank analysts. “But the fuse on that assault could still be a fairly long one, allowing the market1s worst fears to linger as Bush goes through the required political steps on Capitol Hill and at the UN, along with the needed military preparations.”

“Finally, in Europe, storm clouds are brewing, less over politics than in the economy itself, which is showing particular strains of late in Germany. Talk has focused on an American double dip, but if anything, that risk may be even greater on the European continent,” the analysts warn. “All of this points to a continued appeal of the safest of assets. There’s nothing like the full faith and credit of the US Treasury to warm a nervous investor1s heart.
Close behind will be other sovereign bonds in the major developed countries, and even gold may have some glitter despite the absence of inflation risks.”