Low inflation is frustrating for central bankers.

The reason? They can't lower interest rates much below zero as long as investors have the option of withdrawing cash and putting it in the “Bank of Sealy Posturepedic.”

And if inflation is near zero and interest rates are already at zero, then central banks can't stimulate the economy by lowering the cost of borrowing. Thus, believers in stimulus – which includes most central bankers these days – are frustrated by this zero lower bound.

Recently, U.S. consumer price inflation came in at zero for the 12-month period ended September 30, 2015.

That figure is a product of the halving in oil prices in the last 12 months. However, the “core” inflation figure is 1.9%, and there are some markets, such as housing, where the official figure of 3.2% inflation may seriously understate the true figure.

On top of that, the oil price drop won't be repeated, since they're not going to start giving the stuff away. So reported inflation will trend upwards regardless of what happens elsewhere.

Not surprisingly, then, gold has shown strength in the last couple of weeks – though inflation isn't the only catalyst.

There's another factor, namely a bizarre new proposal from Bank of England Chief Economist Andy Haldane that's catching on with Fed governors and frustrated central bankers worldwide.

You see, if Haldane gets his way, gold may not just be a store of value – it may be the only one left.

Cashing Out

Haldane's solution is to abolish cash.

For its part, Britain has moved further toward electronic payments than the United States. Checks are already eccentric there. Thus, cash abolition may be feasible.

Everybody would have bank accounts, and all payments, no matter the size, would be undertaken with debit or credit cards (which could themselves be loaded with value at an ATM).

Once everything is electronic, the zero lower bound could be eliminated, and central bankers could set the short-term interest rate at minus 5% if they so desired.