Texas Bullion Depository

Well I just keep thinking of you
Sister Golden Hair surprise
And I just can't live without you
Can't you see it in my eyes?
--America

Last Friday the governor of Texas signed into law a bill to establish a state gold and silver bullion depository. This bullion depository will be the first of its kind among the states. The measure also calls for the repatriation of $1 billion in gold from the Federal Reserve Bank of New York.

Many people take this as another sign of declining trust in federal government policies including those of the Federal Reserve. Texas gold will be out of federal control and closer to home. Interestingly, people from all over the world have been calling Texas officials to express interest in storing their gold in the new depository.

Part of the worry involves issues of rehypothecation. It is possible that gold held in federally owned or audited vaults, particularly bullion that forms the basis for securitized trading vehicles, has been loaned out to others, meaning that there may not be clean title to gold in the event that large numbers of people try to take delivery of the physical asset. The MF Global meltdown a few years back involved a rehypothecation situation.

The other worry is outright confiscation of physical gold by the federal government--similar to what occurred in 1933. The new Texas law seems to anticipate this, as it includes a provision to prevent federal seizure.

This coupled with the state's size and stature make Texas an attractive location for many people interested in securing their gold and silver bullion.

position in gold and silver