We study an overlapping generations model which contains a capital good that resembles actual gold. This capital good can he stored without physically depreciating and can, by using other resources, be converted back and forth between gold jewelry which yields utility directly and raw gold which does not.Under the assumption that the three utility-yielding objects—first and second period consumption and jewelry—are gross substitutes, stationary equilibria are shown to exist and are characterized; for some parameter values, there are inefficient equilibria, while for others there are efficient equilibria. Both types can be interpreted as commodity money equilibria.

Cover note : "An earlier version of this paper was presented at a seminar at MIT."