Precious metals rally and gold hoarding by US universities

Wednesday, April 20, 2011
By Paul Martin

By John Bear

Dallas hedge-fund boss J. Kyle Bass helped guide the University of Texas Investment Management Co. on getting delivery of 6,643 gold bars, worth $987 million on April 15, now kept in a bank storage place in New York.
Bass, who made profits of $500 million with 2006 bets on a U.S. subprime-mortgage marketplace collapse, said managers of the endowment, referred to as UTIMCO, sought board approval to convert its gold investment funds into bullion this year. A board member, Bass, 41, said he was asked to assist with that procedure.

Whilst 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 employees members, “I helped where I could.” Gold futures reached a record $1,489.10 an ounce April 15 in New York prior to closing at $1,486.

This Texas fund’s $19.9 billion in assets positioned it behind only Harvard University’s endowment as of August, based on the National Association of College and University Business Officers. In 2010, UTIMCO added about $500 million in gold purchases to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The fund’s supervisors sought to take delivery of bullion to safeguard against demand for the metal overwhelming supply, as outlined by Bass.

Open interest in gold futures and options bought and sold on the Comex usually exceeds supplies held in its warehouses. If the holders of just five percent of those deals opted to take delivery of the metal, there wouldn’t be enough to fund the demand.

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