One Pension-Fund Manager's Estimate: Gold to Hit $10,000 an Ounce
Shayne McGuire, pension-fund manager for a $330 million gold portfolio that supports the Teacher Retirement System of Texas, has written a new book entitled, “Hard Money: Taking Gold to a Higher Investment Level.” He’s boldly predicting gold will soon reach $10,000 an ounce in value.
According to The Wall Street Journal:
“Mr. McGuire was early to the gold trade. In 2007, he and a colleague persuaded the $100 billion Texas fund, the nation’s eighth largest, to move into the metal. It was a novel strategy that made it one of the few large U.S. pension funds to have a fund solely devoted to gold. At the time, gold was trading at around $650, less than half its current price.
“In his 2007 pitch, Mr. McGuire argued that gold was ‘the most underowned major asset, widely seen as an eccentric, anachronistic leftover from the pre-information age that is best for ‘end of world’ types.’ Not everyone at the Texas fund felt the same way. In one meeting, a pension executive sarcastically asked if anyone else in the room thought ‘the world was going to end?’
“Indeed, most pension funds still steer clear of gold, investing just a fraction of 1% on average of their assets in the yellow metal, according to Alan Kosan, of Rogerscasey, an investment-consulting firm. Most pension funds consider gold too volatile and therefore too risky.
“So far, however, Mr. McGuire is in the money. With gold prices surging this year, his fund is up about 25% since its inception a year ago. For its fiscal year ended in June, the Texas pension fund was up 15.6% overall. The gold fund has half its assets invested in a gold exchange-traded fund, SPDR Gold Trust, and the rest invested in gold stocks.”
McGuire is bullish on gold, but considers rising inflation — above other factors which also include a series of fiscal crises and accelerated buying by China — as the main catalyst that will make gold “go hyperbolic.” As the dollar weakens, he anticipates the world’s biggest investors to quickly shift about 1 percent of their holdings into yellow metal and, from that back-of-the-envelope estimate, he reaches his $10,000 price point. You can read more details in The Wall Street Journal’s coverage of a gold bull and his prediction.