Store of Value

What Is a Store of Value?

A store of value can be an asset or currency, as well as a commodity. Many commodities are actually products that maintain their value throughout a prolonged period of time. An item can be considered as a store of value if its value is either stable or can increase over time, but does not depreciate. Gold, as well as other precious metals, are a good store of value due to the fact that their shelf lives are perpetual. A nation's currency has to be a reasonable store of value for its economy to be able to function smoothly.

Let's look at another example, such as milk. This is a poor store of value, due to the fact that, when it decays, it will essentially become worthless. You can say the same thing about any product that depreciates in value over time.

Many economies throughout our history have actually used metals such as gold and silver due to the fact that they can store value, and their relative ease of transport proved to be a convenience. The United States used to be on a gold standard, which meant that dollars were redeemable for a specific weight of gold up until 1971.

In fact, what comprises a store of value can be markedly different throughout countries and cultures, and in most areas of the world, specifically the more advanced economies out there, the local currency can be counted on as a store of value in almost all case scenarios.