When the dollar is so high and US economic growth is running at 4.2% most investors within the United States are unlikely to start buying gold as a hedge against a stock market crash. On the contrary, Americans and foreigners are pushing the stock markets in the United States to new highs. Valuations of the spectacular high technology companies (the FANGs) are greater than ever. The prevailing sentiment is buy high and buy more when the shares rise further. This is the classic mentality of the late stage bull market. How long it lasts will depend upon how many more buyers remain out there and only when  the marginal buyer finally enters the market does one reach standstill before everyone rapidly starts divesting amid a frightening cascade in prices.

Gold, on the other hand, is now relatively cheap. Not yet the holy grail of $700 an ounce, which some see as the crucial point to buy massively. But the gold price has a hard time rising above $1200 an ounce, as gold bears are continually shorting it. Thus one holds it at a loss – foregoing other assets that are rising in price and holding a depreciating asset that offers no yield at all. One would be better off with tax free municipal bonds. As US interest rates rise, the dollar strengthens further. So why buy gold at all?

Russia, however, divested itself of US treasuries earlier this year and speculation has arisen in Moscow as further US sanctions bite that the Russian Government will increase its holdings of gold instead. The United States holds around 75% of its state reserves in gold; Russia, in stark contrast, is way behind most major Powers except China and holds only about 17%.  Russia is also a major gold producer. Much will depend upon knowing the unknowns. If the US stock market collapses by 20% or more within the next year or two with massive global reverberations, as some expect, then those who bought gold as an alternative asset could seem to have been very wise before the event. The current thinking, at least as represented by Ol’ga Solov’eva, a close observer of the international economic situation, in “Globalizatsiya po-russki: ot zolotovalyutnykh rezervov k zolotym”,Nezavisimaya gazeta ( 29 August 2018) is that, although the Russian authorities may have been thinking over their options on gold, no such decision has yet been made. But this may be only a matter of time.