Since silver is 'the people's gold' I would expect this trust to be very popular.
This fund has the monthly delivery option as does PHYS for gold.
Presumably the delivery will be in standard silver bars of 1000 troy ounces with a minimum fineness of .999. This is approximately 68.5 pounds avoirdupois. The bar would be worth about $18,280 at today's prices. Presumably there will be some fees involved in delivery. This size is popular with institutions.
This fund could put some stress on the silver bullion market which is already a bit tight by any measure. We assume the prospectus will indicate a negative position on leasing of the fund's silver, and the requirement not to engage in fractional reserve silver bullion.
Of course there need to be explicit auditing standards down to the bullion level to avoid some of the counter party risk appearing in some of the ETFs which deal in subcontracting with passive audits. ETFs are fine for a trade, but if one is buying bullion for insurance against currency risks, then the auditing and allocation issues become rather substantial.
Financial Posth/t Rodd, aka 'Silverholic'
Sprott Has a New Physical Silver Trust
Barry Critchley
Wednesday, Jul. 14, 2010
It has worked for gold plus a number of other metals including molybdenum and uranium -- though it didn't work for copper -- and the hope now for the promoters is that it will work for silver. We are talking about the Sprott Physical Silver Trust, which wants to raise capital via the sale of US $10 units.As the name suggests, the issuer will use the proceeds to invest in physical silver bullion. "The Trust seeks to provide a secure, convenient and exchange-traded investment alternative for investors interested in holding physical silver bullion without the inconvenience that is typical of a direct investment in physical silver bullion," states the prospectus.
The document offers a number of reasons to invest in physical bullion: It's convenient, all the proceeds will be invested in physical silver; the silver will be stored at the mint and the trust will be able to secure lower transaction costs than investors doing it themselves. But the fund is geared to those who like their income in the form of capital gain; the trust does not intend to pay any dividends.
But one wrinkle is that once a month, unit holders will be able to redeem all or some of their units and receive physical silver. It's not immediately clear why a unit holder would want to do that, other than to provide unit holders with comfort that they can get their hands on the metal...
One reason for the popularity of funds that invest in physical metals is the favourable tax afforded U.S. institutions. The prospectus talks about the capital gains advantages for such buyers: The tax rate is 15% (though it will rise to 20% by year end) on such investments compared with the normal 28% tax rate.
