Store of Value

Understanding the Concept of Store of Value

A store of value is an asset, currency, or commodity that maintains its worth over a long period of time. It is characterized by stability or the potential for appreciation, without depreciation. Precious metals, such as gold, have been widely recognized as reliable stores of value due to their long-lasting nature. In order for an economy to function effectively, its currency must serve as a dependable store of value.

In contrast, perishable items like milk are not good stores of value as they lose their worth when they spoil. Similarly, any product that loses value over time cannot be considered a reliable store of value.

Throughout history, many economies have relied on metals like gold and silver as stores of value. These metals were favored because they retained their value and were easy to transport. Until 1971, the United States operated on a gold standard, where dollars could be exchanged for a specific amount of gold.

The definition of a store of value may vary across different countries and cultures. However, in most advanced economies, the local currency can generally be trusted as a store of value in almost all situations.