I believe that Pension Funds and Insurance Companies moving more assets into gold is a critical indicator of the US economic demise. Gold used as a low-correlation hedge in a portfolio will start becoming common place in the galaxy of Pension and Insurance Funds worth over 43 Trillion dollars. Move over China, here comes some serious hoarding.
Gold (Au) is a precious metal; a monetary metal; considered by states, central banks, and once entire civilizations as money, perhaps the most important money. It is one of a very few global historic and timeless methods for storage of wealth. Gold acquisitions in boom or bust cycles is a metric, a litmus, a measure of faith in other monetary forms and stores of wealth. Gold is a canary in the coal mine and it is telling us something. Listen:
While S&P delivers a negative opinion on a the mystical (a.k.a bullshit) AAA bond rating of the "US of debt, unfunded entitlements and un(der)employed", Fed Benny and Treasury Timmah got their last lesson on monetary sentiment from The University of Texas Pension Fund (The UT System).
Bloomberg reported that University of Texas Pension fund (UT ) increased its holdings in physical Au allocated bullion to about 5%. This percentage for gold in a pension fund is almost unheard of, except to people like Dallas Hedge Fund manager: Kyle Bass, and TRS (Teacher Retirement System of Texas) Manager: Shayne McGuire. According to Bloomberg, HSBC will be the custodian in NY for UT's hoard of approx. $1 Billion Au. http://aucanary.blogspot.com/2011/04/golden-tipping-point-university-of.html
Most importantly this gold holding is not in some pretend paper (GLD or iAU) account -- its the real thing: allocated bullion. No cheesey COMEX receipts for the UT. nothing but the real thing, baby... ain't nothing like the real thing.
See my post about pension funds from last year -- It was correct to believe Shayne McGuire from the Texas Teachers Pension Fund, who has been promoting gold as "acting like a currency". (A currency without a nation.) Pension Funds worldwide represent about 25 trillion (USD equivalent) in assets, plus there's insurance funds and then combined with mutual funds are worth over 60 Trillion. (60 million, millions). For you bankers: That's the equivalent of a stack of money starting from your printing press and going up (to) Uranus.
In my original post I calculated (on the back of a gas bill envelop) that if just the pension funds (not the insurance or mutual funds) increase their Au bullion holdings by 1% that would be equal to about 3000 metric tons of gold. Please read the last sentence again, bankers: that's gold up (to) Uranus.
Now we see the UT System holding a full 5% of assets in physical Au -- So, will other pension follow suit now at a time when Au price is fighting bank manipulation around the psychological $1500 spot price level? Will other funds see the value of an asset correlated low against fiat denominated holdings? -- (Gold - Reducing VAR) -- or, will they see it as chasing an investment whose price is certainly not as attractive as 4 years ago? I believe the former, because Pension fund managers are extreemly intelligent conservative investors looking for slow steady growth and risk aversion, instead of the big investment return. 5% of a portfolio allocated in physical monetary metal is the opposite of taking on a risky position, it's a legitimate longer term risk aversion strategy. (Gold Low Correlation - evidence again)
It might be worth it to listen to the London FT interview with Mr. Shayne McGuire once again: http://aucanary.blogspot.com/2010/10/pension-funds-and-flight-to-quality.html ... worth it at over 5-digit per troy oz?
The Au Canary is alive and well, and the Mine is continuing to collapse around Tweety. Chirp! Got earthquake insurance?
AuCanary
Sorry Mr. Rogers, I personally don't believe AU/Ag spot prices are gonna be too gradual and smooth going forward. However I too would like to see a few pull backs or "BTFD levels return". :
WHAT ARE YOUR THOUGHTS ON THIS ONE? Drop me a line or comment below.
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