Central bank digital currencies and the implications for the gold market


Technological change has always been a driving force in the evolution of money. The barter system could only give way to commodity money because refining and standardisation built trust in precious metal coinage. Paper notes gained acceptability because improved printing technology reduced the risk of counterfeiting. Throughout the history of money, technological change has helped to reduce the core challenges of transacting: ease, reliability, and trust.

The world appears to be poised for the next step in the evolution of money. Private cryptocurrencies have emerged as a potential new medium of exchange, although their long-term viability is yet to be proven. Central banks have also seized on the possibilities brought about by our highly digitised world with the development of central bank digital currencies, or CBDCs. Together with our partners at OMFIF, we are launching a new report – Central Bank Digital Currencies and Gold – that discusses the development of CBDCs and the potential implications on the gold market.


CBDCs can potentially enable a wide range of new features. Money can become programmable, allowing policymakers to incentivise certain spending behaviours that can optimise economic impact or address social concerns. The trackable nature of CBDCs can also help to deter financial crimes or the use of currency to pay for illegal items. However, these features also touch on concerns about personal privacy and the freedom to spend as one sees fit. Although the exact function of CBDCs will only be determined as they begin to be used in the real world, their potential impacts on societies may be significant.

It is interesting therefore to examine the impacts of this newest form of money on one of the oldest – gold. Gold functioned as money for centuries, a role which it lost only fifty years ago with the end of Bretton Woods system. Nevertheless, gold has continued to thrive as a distinct asset class, a form of money that is outside the control of policymakers. With CBDCs on the horizon, discussions about privacy, monetary policy, and programmability will inevitably emerge. Some may turn to gold as a way to allay these concerns. Increasing cross-border usage of CBDCs may lead to greater currency volatility, prompting some central banks to potentially build up greater gold reserves as a result.

This report will examine the potential paths which CBDCs might take and their impact on gold as well. While the possibilities that we explore are all speculative, this report can serve as a starting point for thinking about the wider impacts of CBDCs on our relationship with money. Money will continue to evolve with changing technology, but how these changes will impact how we spend, save, and transact can only be understood over time.