Silver? The Swiss franc? Fear sends investors to safety

NEW YORK (CNNMoney.com) -- Fear has taken control of the markets as sovereign debt woes in Europe remain in the spotlight, spurring demand for low-risk investments such as the dollar, gold and U.S. Treasurys.

These so-called safe havens have benefited over the past two months as investors worry that financial challenges in the so-called PIIGS -- Portugal, Italy, Ireland, Greece, and Spain-- will spill over into the rest of Europe.

"There's a flight to quality caused by the fear that perhaps some of the weaker members of the European Union will default and send other European economies into a tailspin," said Peter Cardillo, chief market strategist at Avalon Partners.

Currencies. The focus on problems abroad has inspired a rally in the dollar. The greenback is up more than 17% year-to-date against the euro, and it's gained 11% over the last two months alone, standing just below $1.20 against the euro.

The euro could plunge to $1.15 by the end of the year, according to FOREX.com chief currency strategist Brian Dolan, and "parity is definitely a story for 2011."

"Investors are attracted to currencies whose countries have solid balance sheets," said Dolan. "The euro and the pound have been sticking out like sore thumbs."

The euro-zone debt crisis has also pushed traders seeking safety into the Swiss franc, which rose to a new record against the euro Tuesday. Switzerland, unlike many other countries in Europe, has a relatively low debt level.

Metals. Gold climbed to an all-time intra day high and settled at a record $1,246.50 an ounce Tuesday.

"Historically, gold was used as money before currencies," said Carlos Sanchez, precious metals analyst at CPM Group. "And given the problems countries are facing with large debts and fiscal imbalances, investors are moving to gold, which is seen as an alternate currency."

Sanchez said gold could rise as high as $1,300 over the next few weeks as the stock market remains volatile and vulnerable.

Even if Europe's debt concerns ease and investors regain some confidence in markets, Sanchez said the fragility of the global economic recovery will keep gold prices between $1,050 and $1,300 an ounce, much higher than pre-recession levels. In November 2008, gold prices averaged $755 an ounce.

Safe haven demand has also pushed up silver prices near historical highs. Silver for July delivery tracked gold's climb, rising 32 cents, or 1.7%, to $18.47 an ounce Tuesday. Silver surged 5% on Monday.

Treasurys. Fearful investors have also been buying up U.S. government-backed debt. All that buying has pushed the yield on the 10-year benchmark note down close to 3% lately (Treasury prices and yields move in opposite directions).

"We're the largest economy in the world and still considered a safe-haven bet," Avalon Partner's Cardillo said. "Fear over Europe has been strengthening the flow of money into Treasurys."

While some analysts think shaky global economic conditions will continue to drive a flight to safety, Cardillo said the concerns triggering the run on Treasurys, the dollar and gold will dissipate within the next couple of months.

"Europe had problems, but the fear over the problems is grossly overblown," Cardillo said, adding that he does not expect a severe downturn for Europe.

And while the United States faces its own deficit problems and a stubbornly high unemployment rate, the economy is beginning to improve.

"We have our own problems but our economy is growing," Cardillo said. "It's not at a robust rate, but there's certainly no fear factor that we're going to default on our debt."