Central Banks Flock to Gold as Inflation-Beating Store of Value

The definition of a store of value is an asset that can be saved now and exchanged later without a significant loss of purchasing power. To test this, economists Pradeep Dubey, John Geanakoplos, and Martin Shubik modeled the question against tobacco in a 2003 paper. They found that gold, which pays no yield and has a floating price, is an efficient store of value.

The US dollar has lost approximately 87% of its purchasing power since President Nixon closed the gold-convertibility window in August 1971. Over the same period, gold rose to a record $5,589.38 on January 28, 2026, a gain exceeding 15,000%. This comparison shows that gold has functioned as a store of value against the currency it is priced in.

Central banks keep citing purchasing-power preservation as a reason to hold gold. In fact, 90% of respondents to the World Gold Council's 2026 Central Bank Gold Reserves Survey cited its performance during periods of crisis, while 84% cited its role as a long-term store of value by name.

However, there are downsides to holding gold as a store of value. It pays no dividend, no coupon, and no interest, making it vulnerable to real interest rates rising. It also carries real storage, insurance, and verification costs that other assets do not.