Congressman Ron Paul (R-TX) tripped up Federal Reserve Chairman Ben Bernanke during a hearing Wednesday when he asked why central banks hold stockades of gold and diamonds.

Bernanke initially tried to explain that many people invest in gold futures because it can help hedge risks in other markets and acts as a more stable store of value than some currencies — but Paul, a longtime critic of the central bank and fiat currency in general, cut him off.

“Do you think gold is money?” the Texas congressman asked.

“No, it’s a precious metal,” Bernanke replied.

“Even if it’s money for over 6,000 years? Somebody reversed that and eliminated that economic law?” Paul pressed.

“Well, it’s an asset,” the Fed chairman answered. “Would you say Treasury bills are money? I don’t think that they’re money either, but they’re financial assets.”

“Why do central banks hold it, if it’s not money?” Paul asked. “Why do they hold diamonds?”

“Well, it’s tradition,” Bernanke answered. “Long term tradition.”

Paul, who is seeking his party’s nomination to the presidency in 2012, said earlier this week that he plans to resign from Congress soon to fully devote himself to his campaign.

This video is from CSPAN 3, snipped by the Ron Paul group Campaign for Liberty, published to YouTube on Wednesday, July 13, 2011.

(H/T: Forbes)