The Gold Rush By Institutional Investors Around The Globe Has Already Started, Gold Prices Rising

May 17, 2011 - PRLog -- People who have labored on Wall Street all of their lives have learned one thing, that big institutional investors, like pension funds and endowments, rarely veer from the herd. They manage an excessive amount of other people's cash to stick their necks out alone. If their investments go bad, at least they are able to point to everybody else who worked out just as badly.

Because of this, these funds are often lagging in their perception of crucial marketplace changes such as a doomed currency. Whilst numerous of us are purchasing precious metals to hedge against the collapse of the dollar, gold and silver have been taboo investments on Wall Street for years. Fund managers are taught that gold is a barbarous relic and that it is much better to stick with government bonds and blue-chip stocks. That is what everyone else is doing. But you will find early signs that the herd is changing direction. Check Out Silver & Gold Trading Ideas Now! http://www.silver-dollar-values.com/Selling-Gold/

In a remarkably under-reported story, the University of Texas' endowment fund, the second largest within the country, following Harvard's, added about half of a billion dollars value of gold to its portfolio just this month, on top of the half-billion it bought several months prior.

The university's endowment now owns a whopping 6,643 bars of bullion (664,300 ounces) - which have already appreciated by almost $40 million since mid-April, when the bars were delivered to a dedicated HSBC-owned vault in New York City.

Kyle Bass, the well known Hayman Capital hedge fund manager and UT endowment panel member, advised the university on the purchase. He stated his reasoning plainly: "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? I look at gold as just another currency that they can't print any more of."

Apparently, the university agrees that sitting on a pile of fiat paper is an act of faith not befitting a prudent and enlightened institution. The buy is definitely causing a few heads to turn. Now that a major endowment has taken this step, other fund managers are going to be emboldened to follow via on their gut instincts. These are intelligent guys. They are conscious that although their funds might be posting nominal gains, they're losing a lot much more in purchasing power. I wouldn’t be surprised if numerous have privately purchased precious metals, but now they've protection to do so professionally.

Maybe the most fascinating part of UT's billion-dollar repudiation of Federal Reserve Bank Chairman Bernanke and his printing press, nevertheless, is that the fund required physical delivery of the bullion. While more commonplace in Europe, this is really unprecedented for a United States institution. Check Out Silver & Gold Trading Ideas Now! http://www.silver-dollar-values.com/Selling-Gold/

In my way of thinking, the delivery of physical bullion suggests a minimum of two important implications. The first is that UT perceives gold to be a long-term strategy for wealth preservation, in contrast to a short-term speculation. The second is that UT must be somewhat worried about the stability of monetary markets in general. It wants to own physical gold safely stored in a vault, as opposed to owning paper promises or other instruments with counterparty risk.

Specialists have long suggested that investors hold at least 5-10% of their portfolios in actual precious metals. UT's $1 billion position represents roughly 5% of its $20 billion endowment fund.

If endowment after endowment fund were to decide to sell billions of Bernanke's dollars and change course into gold, what might this provide to the gold price? If these massive funds begin obtaining the idea that holding 5% of their portfolios in gold is more conservative and intelligent than holding the present average of 1%, what would this mean for gold prices and gold demand? I think you are able to determine that the answer is clear. Gold prices will be going up, up, and up! Check Out Silver & Gold Trading Ideas Now! http://www.silver-dollar-values.com/Selling-Gold/

If US university endowments had been to improve their gold positions from the present average of 1% to an average of 5% of their portfolios, it would equal $20 billion, or roughly 400 metric tons of gold at today's spot price. Outside of endowments, private foundations within the US, with 2010 assets totaling nearly $600 billion, would similarly need almost 600 metric tons of gold if they sought to hold 5% of their assets within the metal. These are just US endowments and foundations; there's a entire world beyond our boundaries.

The point here is simple; the total potentially investable funds around the world are significant relative to the size of the present gold market. It is not hard to perceive what a simple move from 1% to 5% of average investment portfolios would do to the price of gold, and this is why the University of Texas' gold bullion delivery is so crucial. It's a vivid indication that such a move may now be taking place.

Gold remains widely neglected among the big cash players, but it is clear that they're beginning to come to terms with the unfavorable prospects for the US dollar. Although fund managers do not want to veer from the herd, they also don't want to follow the herd off a cliff.

The University of Texas, with its billion-dollar deposit of physical gold, is one college that has finally seen the cliff. The physical delivery of this purchase exemplifies the severity of the threat that UT's endowment board perceives.

We may be on the cusp of a smart-money gold race. If that's so, it could drive gold to a record in actual terms, even before retail investors join in. In my expert opinion, my recommendation is for prudent investors to purchase gold now while there are still adequate supplies available, and the price is fairly affordable compared to future prices down the road. Buy gold today!

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