The state of Utah was the first to pass a law allowing gold and silver coins issued by the U.S. Mint as an acceptable form of payment in the state. Now, the state of Texas wants to repatriate gold owned by the state and currently held in a New York City Bank.
The only Texas state agency that owns a significant amount of gold is the University of Texas Investment Management Company that stores about $660 million worth of gold in New York. Last month the state legislature passed and the governor signed a bill to bring the bullion back home.
Easier said than done. The state has no place to store the gold (about 5,600 bars) and the state comptroller has no funds to build a depository. In addition, the university management company is under no obligation to move the gold back to Texas.
When Governor Greg Abbott signed the bill he said:
[T]he Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state.
But the idea has a much grander goal than simply keeping the bullion locked up in storage. The state representative who sponsored the bill wants the state to become a “commodities hub for the continent.” The depository would not only store gold and other precious metals, but also permit investors to open accounts and, perhaps, pay for transactions with their deposits. The state would charge fees to cover storage and transaction costs and use the money to pay a contractor to operate the depository.
In order to bring its gold back home, the university management committee has set two conditions: one, it must be cheaper to store the gold in Texas than it now is to store the gold in New York; second, and trickier, is that the depository would have to become a full member of Comex where gold futures are traded. That second condition is trickier because the bill specifically forbids the depository from making futures transactions.
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