Texas opens the nation's first state-run gold depository

By David Yaffe-Bellany

Texans can now store their precious metals in a publicly backed secure vault close to home, as the United States’ first state-run gold depository opens for business in Austin.

A 23,000-square-foot building — operated by the private storage company Lone Star Tangible Assets — will serve as Texas' precious metals depository until 2019, when Lone Star is scheduled to open a facility double that size in Leander. Texas Comptroller Glenn Hegar became the first person to take advantage of the fully insured Texas Bullion Depository when he deposited some of his personal gold in the Austin vault earlier this week, according to his office.

The construction of the Leander depository is set to begin “in the next couple of months,” said Kevin Lyons, spokesman for the Texas comptroller’s office. Once that facility opens, the precious metals deposited in Austin will be transported to Leander.

The long road to the depository's opening began in 2013, when state Rep. Giovanni Capriglione, R-Southlake, proposed a bill to establish the state’s bullion depository, drawing the support of then-Gov. Rick Perry. Yet the bill floundered in large part due to estimates that it would cost the state $14 million in just the first two years.

Two years later, Capriglione rewrote the bill to allow for the state to hire an outside firm to manage the depository, with the expectation that the firm would charge fees to customers to cover the depository’s costs. With no cost to the state, the bill sailed through the Legislature and landed on Gov. Greg Abbott’s desk with little debate.

Last summer, after a two-year search process, Hegar’s office selected Lone Star Tangible Assets, which specializes in moving and storing precious metals, to construct and operate the depository with oversight from the state. 

But despite that progress, Abbott's most ambitious aim for the depository seems unlikely to be fulfilled. 

The University of Texas Investment Management Company, which oversees the assets of the University of Texas and Texas A&M; systems, holds $1 billion worth of gold bullion at the HSBC Bank in New York City, according to Karen Adler, a spokeswoman for the organization. When Abbott signed the gold depository bill into law in June 2015, he  declared that the opening of a state-run facility would allow Texas to “repatriate” the nonprofit's gold supply.

Three years later, however, the prospect of UTIMCO moving its gold to Texas appears remote. UTIMCO officials say the new Texas depository would have to become a member of the Chicago Mercantile Exchange’s COMEX platform, where gold futures contracts are traded, for any transfer to move forward. And Lone Star Tangible Assets spokesman Josh Hinsdale said Tuesday that simple geography has prevented the Texas Bullion Depository from joining COMEX, whose rules stipulate that approved depositories must be located within 150 miles of New York.

Still, Hinsdale emphasized that Lone Star has found other ways to liquidate gold quickly. "If their concern is ‘we have to liquidate 100 million at a time,’ we’ve got that covered," he said. "We are coming out of the gate with liquidity options for large sellers, so we call it COMEX-like."

And, on Tuesday, Lyons did not rule out a future effort by the Texas comptroller's office to get the state depository approved by COMEX. “We just haven’t actively pursued the issue,” he said. “It’s too early to say whether we’ll join COMEX.”

Whatever the fate of the gold stored in New York, the opening of the Austin depository means that Texans can now place precious metals in a local vault layered with cameras and alarms and overseen by the state government. In addition to Hegar, Capriglione has also deposited metals in the new temporary home of the Texas Bullion Depository. 

“We just wanted to get this going,” Lyons said. “The Legislature gave us the permission to do it, so why wait?”

This article originally appeared in The Texas Tribune

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