Texas University Fund Sold $375 Million in Gold Bars

The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.

In the three months that ended Feb. 28, the Austin, Texas- based fund bought $75 million in gold futures, $225 million in developed- market equities and $75 million in emerging-market equity futures, Bruce Zimmerman, the chief executive officer, said yesterday in a telephone interview.

The fund, which manages $29.2 billion, started taking delivery of gold through futures contracts starting in 2008 as a hedge against inflation, Zimmerman said. While fund managers and directors remain concerned that global consumer prices may increase, the fund wanted to increase investments in equities, he said.

“Our idea was to buy and hold gold, and when the world’s central banks begin tightening, we’ll sell,” Zimmerman said. “The price of gold has traded off, but the world’s central banks haven’t started tightening.”

The latest investment didn’t change the fund’s overall exposure to the metal because of the leverage involved in its gold futures, Zimmerman said.

The fund hasn’t bought or sold gold since February, he said. Its gold holdings are now valued at about $1.1 billion, while its cost basis is $967 million, he said.

Gold futures on the Comex in New York fell 12 percent in the 12 months that ended Feb. 28. On April 15, the price plunged 9.3 percent, the most in 33 years, after entering a bear market. On the following day, the metal touched a 26-month low of $1,321.50 an ounce.

(Source: Bloomberg)

Euro Near 2-Week Low Before German Business Confidence

The euro was near a two-week low before a report forecast to show German business confidence declined, fueling speculation the European Central Bank will cut interest rates.

 “The euro is susceptible to downward pressure,” said Masato Yanagiya, the New York-based head of foreign-exchange and money trading at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “As economic data from Europe are very bad, expectations of a rate cut by the ECB are rising gradually.”

The euro traded at $1.2996 as of 11 a.m. in Tokyo, unchanged from yesterday when it fell to $1.2973, the lowest since April 8. The 17-nation currency declined 0.1 percent to 129.17 per euro. The yen rose 0.1 percent to 99.41 per dollar.

The Ifo institute’s business climate index for Germany, based on a survey of about 7,000 executives, dropped to 106.2 in April from 106.7, according to the median estimate of economists surveyed by Bloomberg News before today’s report. A German purchasing managers’ index unexpectedly fell yesterday, while the Bundesbank said in its monthly report this week that the nation’s recovery may be delayed.

(Source: Bloomberg)

WTI Crude Trades Near One-Week High; U.S. Stockpiles Seen Rising

West Texas Intermediate crude traded near the highest price in more than a week. U.S. stockpiles probably rose to the largest in more than 22 years, a Bloomberg News survey showed before a government report.

Futures were little changed in New York after climbing a third day yesterday. U.S. supplies increased by 1.75 million barrels last week to 389.4 million, the highest since July 1990, according to the median of nine analyst estimates before a report from the Energy Information Administration tomorrow. Global oil markets are in balance and receiving ample crude, Suhail Mohammed Al Mazrouei, the energy minister of the United Arab Emirates, said yesterday.

WTI for June delivery was at $89.36 a barrel, up 17 cents, in electronic trading on the New York Mercantile Exchange at 9:26 a.m. Sydney time. The volume of all contracts traded was 73 percent below the 100-day average. The May future gained 75 cents to $88.76, the highest close since April 12, as it expired yesterday. Prices are down 2.7 percent this year.

Brent for June settlement climbed 74 cents to $100.39 a barrel on the London-based ICE Futures Europe exchange yesterday. The front-month European benchmark grade ended the session at a premium of $11.20 to WTI futures.

U.S. gasoline stockpiles were probably unchanged last week while distillate inventories, a category that includes heating oil and diesel, rose by 400,000 barrels, the Bloomberg survey showed.

The Organization of Petroleum Exporting Countries, which plans to meet May 31 to review its production target, is ensuring that global crude supplies are sufficient, Al Mazrouei told reporters in Abu Dhabi. The U.A.E.’s governor to OPEC, Ali Al Yabhouni, said the group’s limit of 30 million barrels a day is adequate for 2013. Both officials spoke at the Middle East Petroleum and Gas Conference.

(Source: Bloomberg)