02 June 2015

NAV Premiums of Precious Metal Trust and Funds - 15,230 Ounces Gold Redeemed From Sprott

Since the last time this was posted on May 29, about 15,230 ounces of gold were redeemed from the Sprott Physical Gold Trust.  That represents a bit less than half a tonne, and $18,276,000 at $1200 per ounce.

With the discount to NAV so slim at about 0.32%, or around $58,000, less fees and storage costs, there might be another reason to do something like this other than a pure arbitrage.  I can see someone doing it to take the gold as a long term physical holding, and to essentially avoid the Sprott management fee.  But again, why take it out of the ETF and not the Comex?  Is the Comex somehow more difficult than usual in obtaining physical delivery out of the system?
Yes, Sprott has an offer out to acquire some gold and silver assets at GTU and SBT, but an arbitrage on acquisition could be carried out in the conventional way buying and selling the units in size with leverage, not taking delivery of a relatively small amount of gold.

If one were to take that gold and move it into a Far Eastern market where physical commands a premium it might make more sense.
Before you ask, the Trust did not 'sell it' because their cash level has not increased commensurately with such an action.  And if an individual holder of the units wanted to raise cash for some purpose, the sale of the units themselves on an exchange is much more cost effective.  No it seems more likely that someone wanted gold bullion for some reason.

Funny way to take your delivery, isn't it?  Out of the ETFs.  Rather than buying futures contracts and standing for delivery on the Comex, for example, or in the so-called wholesale market in London.

Curiouser and curiouser.