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Texas University Endowment Hasn't Lost Faith in Gold

By Dan Weil   |  

The endowment for the University of Texas and Texas A&M University has lost $300 million on gold's plunge since October, but Bruce Zimmerman, CEO of University of Texas Investment Management Co. (Utimco), isn't budging on his position.

Gold has plunged 22 percent to $1,391 an ounce early Friday from $1,790 in October. Meanwhile, Utimco's gold investment has dropped to about $1.1 billion from $1.4 billion.

"We always prefer that our assets go up, rather than down, but we're not day traders," Zimmerman told The Wall Street Journal. "Gold is a hedge, and it still fills that role."

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He's even thinking of purchasing more of the precious metal. And he won't consider getting out until central banks, including the Federal Reserve, reverse their massive easing programs.

The Fed will need to tighten at some point to prevent an inflation outbreak, Zimmerman noted.

"The basic reason we put on the hedge still exists. You could see interest rates and yields way up, and that would be bad for stocks," he said. "Right now, everyone's dancing, but there really isn't an elegant exit to easy money."

So far, obviously, the Fed's easing hasn't done much for gold, at least in the last 1 ½ years.

"The Fed has been buying bonds since the beginning of the year, and gold hasn't done much," Karim Cherif, a commodity analyst at Credit Suisse, told Reuters. "If you look across the world, we are indeed seeing monetary easing, but inflation expectations are dropping."

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The endowment for the University of Texas and Texas A&M University has lost $300 million on gold's plunge since October, but Bruce Zimmerman, CEO of University of Texas Investment Management Co. (Utimco), isn't budging on his position.
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