University of Texas's Gold Buy Is a Game-Changer

Apr. 19, 2011 12:49 PM ETSPDR Gold Trust ETF (GLD)23 Comments
Ananthan Thangavel profile picture
Ananthan Thangavel

Over the weekend, an announcement was made that the University of Texas endowment fund had decided to take delivery of $1 billion worth of gold. This was an absolutely huge development on multiple fronts.

First, the UT endowment fund’s gold purchase was a radical deviation from the standard institutional portfolio, the possibility of which we have considered for some time. Since UT has about $20 billion in assets, a $1 billion gold allocation would indicate 5% of its assets in gold. The standard institutional allocation to gold is 1%; a 5% allocation is a huge increase. If (or in our opinion, when) other institutions adopt a similar stance, the price of gold will skyrocket.

Second, the endowment’s purchase of this large an amount of gold gives a huge vote of confidence to gold and precious metals as an investment. For the past few years, financial media has lined up “experts” to tell us all about how gold is an irrational and poor investment, including figures as large as Warren Buffett’s right hand man, Charlie Munger.

Well, the UT endowment fund is neither dumb nor stupid, and it helps that it's not poor: It's well-funded institutional investors who are making a tactical investment decision, not a short-term trade. As Kyle Bass, the hedge fund manager who advised UT to purchase the gold, explained, the gold was purchased as a hedge against money-printing and currency debasement worldwide.

The UT fund is not a charlatan investor such as a hedge fund. It's purchasing gold on its merits as a long-term, fundamental investment. As other institutional investors witness such a large and respected fund invest in gold, others’ resolve to increase investments in gold will be solidified. Since gold only comprises 0.7% of the world’s financial assets currently, it is massively underowned by institutions, and UT’s purchase could be the catalyst to finally

This article was written by

Ananthan Thangavel profile picture
Ananthan Thangavel is the Managing Director of Lakshmi Capital and Lead Writer for the RealFinance Commodity Analyst Newsletter. He is particularly proud of producing a return 35.01% annualized since inception (through 12/31/11) for his Lakshmi Capital Global Macro ARS clients ( Mr. Thangavel is frequently interviewed by major media outlets including Forbes and Fox Business. He called the exact top of the silver market in an interview with Bob Lenzner of Forbes ( and also called gold's collapse in September 2011 ( Mr. Thangavel authors The Commodity Analyst, a newsletter service that provides weekly in-depth commodity and currency research and trading recommendations as well as daily blog updates to remind investors what to keep any eye out for ( Ananthan welcomes collaboration and interaction in his Members Forum, a discussion board that allows for direct interaction with Ananthan. Ananthan Thangavel holds a B.S. in Economics from Northwestern University, and a J.D. from UCLA School of Law. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Recommended For You

Comments (23)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.