“There was a widely-circulated belief that the euro as a currency will cease existing,” said Michael Aronstein, the president of Marketfield Asset Management LLC in New York, whose MainStay Marketfield Fund beat 97 percent of its peers in the past five years. “A lot of foreign central banks thought they cannot keep the euro and did not want to increase dollars. It was desperation and fear that drove the surge in demand.”

Purchasing Power

While gold is trading below the 1980 high on an inflation- adjusted basis, it has still been better than the dollar in preserving its purchasing power. A dollar bought about three quarters of a gallon of milk in 1970, a year before the peg to gold ended, and an ounce of gold 28 gallons. By the end of 2011, a dollar got you about a quarter of a gallon and an ounce of bullion 420 gallons.

Holding gold is a reasonable, prudent strategy and central bankers probably build reserves with a one- to two-decade view rather than one to two years, Nathan Sheets, the former head of the Fed’s international-finance division and now the global head of international economics at Citigroup Inc., said in an interview in August. The U.S., Germany and Italy, which together own 44 percent of all central-bank holdings, changed gold reserves by less than 3 percent since the start of 1999.

U.S. holdings of 8,133.5 tons, valued at $344.2 billion and accounting for 72 percent of total reserves, are the world’s largest. Most is stored at the U.S. Bullion Depository at Fort Knox in Kentucky and has been held at a book value of $42.22 an ounce since 1973, the U.S. Mint’s and Fed’s websites show. The hoard contracted by about 450 tons, or 5 percent, since then.

Former Texas Representative Ron Paul, the Republican who pushed for an independent count of U.S. gold holdings to prove they exist, also urged that a commission consider “a metallic basis for U.S. currency.” Utah recognizes precious metals as currency and lawmakers in at least six other states have or are considering bills to accept bullion coins as legal tender.

“The gold standard era, at least from an academic view and I think from people that were contemporaries in the 19th century, were that it didn’t work very well,” St. Louis Fed President James Bullard said Aug. 23 in Jackson Hole, Wyoming. “It seems like it would be very problematic to tie the dollar to gold in an environment where gold is fluctuating like crazy.”

Fixed Amounts

Returning to a gold standard, a monetary system in which currencies are converted into fixed amounts of metal, wouldn’t be feasible because there’s not enough available and it would prevent governments loosening monetary policy, Bernanke said at George Washington University in March 2012.

Central banks’ gold holdings are valued at $1.35 trillion now and totaled $1.9 trillion in September 2011 at prices then. Nations will buy more than another 500 tons by 2018, Morgan Stanley says. Their appetite contrasts with investors who cut the value of holdings in ETPs by 43 percent this year to $81.4 billion, data compiled by Bloomberg show.