large gold purchase - what does it mean?

[pinkytoe]

Yesterday I read that the investment entity that funds my place of employment, a state university, just ordered gold bullion at a cost of nearly one billion dollars. It will be stored at a bank vault in NY somewhere. Why would they do this now? I know...not a personal finance question but just curious what others think of that move.

[ApatheticNoMore]

Too much unknown here to even guess. Perhaps they are planning to offer some kind of precious metals fund because they sense there is customer demand for that? 401ks offer specialized sector funds and the like that their customers can choose to invest it, although pensions may not work that way.

Or perhaps they plan to add it to their general portfolio based on whatever analysis the investment company does that predicts gold is going to go up (even the billion figure is meaningless when we don't know how much money they are managing. This might not even be a large percentage of total assets ....). A few decades ago many investments considered it wise to have some gold as part of a balanced portfolio (some gold, not jumping off a cliff and putting the entire of one's portfolio in it).

Gold seems toppy to me now (the time to get in was years ago, not now), but I assume the investment entity has their own analysis that they run on this and it is telling them to make this move.

Gold hit an all time high this week, since the rating agencies are thinking of reducing the credit rating on U.S. government debt off it's AAA rating. These would be the same rating agencies that valued risky and often worthless housing instruments as AAA a few years ago (eye roll). I'm not sure if the rating agencies are genuinely concerned or if they are playing politics or what. I mean even if Obama and the Repubs came to some agreement on the budget, it's not like any of their proposals are REALLY enough to REALLY do much of anything about the U.S. debt anyway. But the whole economic system is run on illusion anyway right? Haha, well there is a lot I don't understand but :)

[RosieTR]

No idea. Maybe they think it's safe? Yes, gold could still go up with some uncertainty in the US treasury market and oil creeping ever higher, but it seems like they would have done this months or years ago. Gold doesn't actually do anything, it just sits there. The theory is that it's a limited supply so it is likely to go up. Same thinking was done for housing a few years' back, however. I'm kicking myself I didn't buy gold about 6 years ago when I thought about it, sigh. But now I drive by corner shops that say "!Compramos Oro! !Roto, Viejo o Sucio es bueno!" ("We buy Gold! Old, Broken or dirty, it's fine!") and I have to wonder if there isn't a gold bubble going on. In 2006 there were all kinds of signs around that indicated people could easily get their real estate license, and in 1999 everyone I talked to couldn't shut up about their Cisco stock splitting or what-have-you. So, it makes me wonder.

[jp1]

Presumably they think that the Federal Reserve Bank is going to continue printing large quantities of money as it has been for some time now, thus diluting the value of all dollars. Since Ben Bernanke only thinks he's Midas I doubt he'll be able to do the same thing with gold.