By Jon Herskovitz
AUSTIN, Texas (Reuters) - Texas has a new law to set up a depository for gold that is backed by many in the state's Republican leadership who have expressed distrust of the U.S. Federal Reserve and feel more comfortable with a precious-metal backed currency.
"The law will repatriate $1 billion of gold bullion from New York to Texas," Republican Governor Greg Abbott's office said, adding that the facility would increase "the security and stability of our gold reserves."
The bullion in question is part of a portfolio for a Texas university-linked investment fund, is currently worth about $660 million and is at a private bank in midtown Manhattan, state officials said.
The law for the "Texas Bullion Depository" was signed on June 12, and Texas lawmakers said it would be the first vault of its kind by any state.
Its sponsor, state Representative Giovanni Capriglione, a Republican, has said the depository will give Texas a hedge if there are problems with the U.S. economy.
The Republican Party of Texas has shown a distrust for central bankers. Its platform calls for a return to a precious metal standard for the U.S. dollar and for an end to the U.S. Federal Reserve Banking System.
"This is uncharted territory," comptroller spokesman Chris Bryan said, adding the office is in the initial stages of looking into what could be a complex endeavor.
The gold holdings belong to the University of Texas Investment Management Company. It was created in 1996 to oversee investments for the University of Texas and Texas A&M University systems.
UTIMCO pays about $600,000 a year to store the gold, its officials said, adding they are amenable to moving any gold that might be a part of its portfolio, but under conditions.
"If the depository does come into being, and if the depository is a robust member of the Chicago Mercantile Exchange, and if the costs to us are equal to or less than what we are currently paying, and if we own physical gold, then we are delighted to store it in Texas," said UTIMCO Chief Executive Officer Bruce Zimmerman.
(Reporting by Jon Herskovitz; Editing by Eric Beech)