Marc Faber, Editor and Publisher of The Gloom, Boom & Doom Report said on CNBC, investors should be their own central banks and gradually accumulate gold reserves as a currency. The endowment fund for the University of Texas did just that. With an endowment nearing the $20 billion, they are currently holding $1 billion in physical gold.
Bruce Zimmerman, chief investment officer of the University of Texas Investment Management Corporation (UTIMCO) told CNBC, We began buying gold in September of ’09 at about $950 dollars an ounce, our average price is about $1,150, we’ve invested around $750 million dollars in gold over that twelve months and now it has a market value of around a billion dollars. They spread there purchases over a 12 month time frame where gold went up over $300 yet the cost average was only $1,150 an ounce.
This is important to consider when acquiring metals while the price may continue to increase, the longer you spread out the purchases the lower the cost average will be. According to Zimmerman, the final purchases would have been about $1,250 an ounce but the average works out to $1,150. This is not any sort of accounting trick it is the reality of acquiring over the long term. Imagine the cost average for someone who started when gold was $250 back in 2002.
He also expressed many of the same concerns we have in this blog about fiat currencies & stimulus plans trotted out by the Fed and EU. Zimmerman commented, The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have access monetary and fiscal stimulus. This is right inline with what we encourage our investors to consider when building a Tangible Asset Portfolio.
Zimmerman told about there preference for physical over ETF’s, rather than continuously roll the futures contracts, it just became easier and more economically for us to take possession of the bullion. Finally, he commented on the diversity of the endowment, Our fixed income investments, particularly investment grade fixed income investments, the role they play in our portfolio is to provide for liquidity and stability. Fixed income, just like the gold, is one element of a very diversified portfolio.
The 3 things we like to advise our clients is: Diversify your portfolio, Acquire over the long-term, Take physical possession, are the exact elements used by one of the largest college endowments in the nation. Consider your long term commitment to a TAP then do it.
Read further: CNBC – Why the University of Texas Invests in Gold