Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Gold Prices
Gold Price
[Most Recent Quotes from www.kitco.com]
Our RSS Feed

Gold Updates by Mail

Enter your email address:

Follow Us on Twitter
« 51 CONSECUTIVE WINNING TRADES from SK OptionTrader | Main | Can You Pass The 2011 Gold Quiz? »
Sunday
Apr172011

Texas Schools Hoarding $1 billion in Bullion at HSBC

UTIMCO.JPG

Dallas hedge-fund manager J. Kyle Bass helped advise the University of Texas Investment Management Co. on taking delivery of 6,643 gold bars, worth $987 million on April 15, now stored in a bank warehouse in New York.

Bass, who made $500 million with 2006 bets on a U.S. subprime-mortgage market collapse, said managers of the endowment, known as UTIMCO, sought board approval to convert its gold investments into bullion this year. A board member, Bass, 41, said he was asked to help with that process.

While Bass, a managing partner at Hayman Capital Management LP, said in an April 16 e-mail that “the decision to purchase and take delivery of the physical gold” was made by endowment staff members, “I helped where I could.” Gold futures touched a record $1,489.10 an ounce April 15 in New York before closing at $1,486.

The Texas fund’s $19.9 billion in assets ranked it behind only Harvard University’s endowment as of August, according to the National Association of College and University Business Officers. Last year, UTIMCO added about $500 million in gold investments to an existing stake, saidBruce Zimmerman, the endowment’s chief executive officer. The fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply, according to Bass.

Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said.

Printing Money

“If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass, who isn’t related to Fort Worth’s billionaireBass family. He said holding cash wasn’t a better choice because the rate of inflation exceeds money-market rates by 2.5 percent to 3 percent, eroding the value of cash.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

Sovereign-debt concerns also boosted demand for the metal on April 15, driving Comex futures to an all-time high. The price has climbed 28 percent in the past year.

Gold’s 10-year rally has attracted billionaire investors such as George Soros and John Paulson,who seek a store of value as record-low interest rates erode returns on currencies.

Wealthy Buyers

Few investors take physical delivery of bullion. As of April 14, 2,860 contracts this month, about 0.5 percent of total open interest, had been converted to metal, exchange data show.
Physical deliveries have slowed as gold topped records this year, said Blake Robben, a senior market strategist who handles deliveries of Comex metals for clients at Chicago-based broker Lind-Waldock.

“It’s usually wealthy individuals with net worths over $1 million who want to take delivery to diversify away from the dollar,” Robben said. “Generally, it’s a big hassle and not worth it to take delivery.”

Investors can own 100 ounces of gold futures with Lind- Waldock by paying a $100 fee and putting up $6,571 in a margin account to purchase one contract. To take delivery of a 100- ounce bar, investors have to pay the full price of the contract.

Bass, a Texas Christian University graduate who was named to the endowment’s board in August, is a former salesman with Bear Stearns Cos. and Legg Mason Inc. He said about 5 percent of his hedge fund is invested in gold.

The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 664,300 ounces of bullion in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at a meeting in Austin.

“I simply voted as a board member to approve the storage facility and concurred with their decisions,” Bass said.



.................................................................................

Over in the Options pit, on Friday, we closed another winning trade so we now have 70 closed trades, 68 closed at a profit, or a 97% success rate, more later.

SK chart 11 April 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.






PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>