Forget Fort Knox or the Federal Reserve. Texas has decided to start keeping its gold holdings within in its own borders. But what makes sense politically in such a sovereignty-loving place is creating a logistical conundrum.
Texas is the only state that owns an actual stockpile of gold, according to public sector and financial industry experts — not just gold futures or investment positions, but approximately 5,600 gold bars worth around $650 million. The holdings, stored at a New York bank, for some harken back to century-old fears about the security of currency not backed by shiny bullion.
The Legislature's decision this summer to bring its gold cache home was hailed by many conservatives, and even some on the far left, who are suspicious of national government.
"There will always be the exact same amount of gold in there as the amount that was put in," no matter what happens to the financial system, said Republican state Rep. Rep. Giovanni Capriglione, a former tea party organizer from the Dallas suburbs who authored the gold bill.
But for the Texas comptroller's office, which has to implement the policy, the catch is that the new Texas Bullion Depository exists in name but not reality.
The law doesn't say where the depository would be or how it should be built or secured. No funding was provided for those purposes or for leasing space elsewhere. Further complicating matters is a provision allowing ordinary people to check their own gold or silver bullion into the facility.
"We are honestly at the phase where the questions we are answering are creating more questions that we have to answer," said Chris Bryan, a comptroller's office spokesman.
Charged with figuring everything out is a four-member task force within the comptroller's office, which recently dispatched an official to a precious metals conference to study up.
One immediate concern is the possible cost. When Fort Knox was completed in 1936 it cost $560,000 — or roughly $9.2 million in today's dollars. When Capriglione first introduced his bill in 2013 it had an estimated cost of $23 million.
But Capriglione now thinks private companies would bid to create a depository in exchange for charging storage and service fees.
The plan has kicked up chatter outside of Texas that it's a step toward secession, an idea raised now and then on the state's farthest political fringe.
"Just moving it would be pretty expensive and, unless Texas is anticipating withdrawing from the union, which I suspect is some peoples' want, I don't see what advantage it is...," said Edwin Truman, a senior fellow at the Washington-based Peterson Institute for International Economics who has written about gold and monetary policy. "What are you getting for what you're paying for?"
But Capriglione says he's just convinced that gold is safer, especially close at hand.
After the bill sailed through the Legislature, Republican Gov. Greg Abbott signed it and tweeted: "California may be the golden state, but Texans deserve to keep their gold in-state!"
Texas' state-owned gold is held by the University of Texas Investment Management Company, the nation's second largest academic endowment behind Harvard. It began gradually amassing gold futures in 2009 as a hedge against currency weakness in the recession. It eventually transitioned to physical bullion, and by 2011 had $1 billion worth.
The price of gold has since mostly slumped amid a soaring stock market. Today, the fund's gold bars represent about 2.5 percent of its $25.4 billion in holdings, said Chief Executive Officer Bruce Zimmerman.
Asked about the new depository, Zimmerman said, "We don't do politics. We're just investors."
The Fed declined comment on the new Texas depository, as did HSBC bank, which currently stores the gold bars in an underground vault in Manhattan.
Stacked together, the state's gold occupies about 20 square feet. It's unclear whether repatriating it could be done with an electronic transfer or would require a fleet of planes or armored cars.
One possible effect of the new depository might be more attention to the idea of returning to the gold standard, long a cause of former Texas Rep. Ron Paul. The Federal Reserve was founded more than a century ago so that the value of the U.S. dollar no longer had to be anchored to gold, and Richard Nixon formally scrapped the gold standard in 1971.
"I think Texas is once again showing they're ahead of the curve," said James Rickards, author of the 2014 book "The Death of Money: The Coming Collapse of the International Monetary System." ''They're not waiting for the disaster, but preparing for it."
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