Pension Fund Manager: Fearing Inflation, Institutions Will Turn to Gold

(October 29, 2009) – At least one pension fund is predicting that retirement systems will buy increasing amounts of gold in order to protect themselves against currency fluctuations and inflation.

Shayne McGuire, Director of Global Research at the $95 billion Teachers’ Retirement System of Texas, recently told Bloomberg that he expects a sea change in gold investing at large institutional investors worldwide. Accordingly, Texas Teachers’ has launched an internally managed gold fund with $250 million behind it.

“I think the largest institutions like our own are realizing that we barely own any,” McGuire told Bloomberg. “The same thing applies to most of the pension funds that manage trillions of dollars in world wealth.”

McGuire’s—and, it must be said, many others’—interest in gold stems from a wish to hedge against a fall in the U.S. dollar, as well as worries about inflation following government actions to prop up U.S. markets, which injected nearly $2 trillion into the economy. The total U.S. marketable debt now stands at $7 trillion, an increase of 22% over 2008 figures.

“I don’t think the question really is what is gold worth, but what are currencies not worth?” McGuire is quoted as saying. “Consider the tremendous fiscal excess that major governments have made to prevent the world economy from collapsing.”