13 April 2016

NAV Premiums of Certain Precious Metal Trusts and Funds

It looks like we have had some notable changes in the closed end trusts and funds since February.  I include both the current and the previous charts of these instruments below.

The first thing that I looked at is the drawdown in gold bullion at the Sprott Physical Gold Trust that has occurred since February of about 57,702 troy ounces.  I think it is probably due to redemptions rather than fund sales because the cash level of the Trust is a workable but relatively modest $1,870,00, down from about $3,345,000.  As you may recall Sprott completed the acquisition of the Central Gold Trust (GTU) in January of this year.

As I have noted several times before, most of the funds and trusts that allow for bullion redemptions have been seeing outflows of gold bullion for some time now, as gold has been moving from West to East.  We have seen some 'inflows' into the big ETF for gold of GLD and a few others like that this year as gold rallied off a bottom.  But I do not quite view the gold in GLD on the same level as some of these closed end funds because of its relative volatility and the nature of its sub-custodial relationships.

Perhaps it is just some perspective bias on my part.  I trust few completely, but then some less than others.  And GLD falls into that category of unease because of their structure of custodianship.  I believe there may be undisclosed counterparty risk, which is not as much of a consideration for short term trading, but of more concern, like the CME was for Kyle Bass as a fiduciary for example, in the kinds of scenarios when gold is held as a long term asset held for 'insurance' against financial dislocations.

The Central Fund of Canada has still not addressed its cash situation, with the current cash assets shown as a negative $1,539,263 (1,539,264), down from a modest positive cash position of $173,805 in February.  I have to admit I was a little surprised to see that.  The bullion levels remain the same.  Typically the Fund does a shelf offering of additional shares to raise cash and add to bullion levels.  Or it is acquired as was its sister the Central Gold Trust.

And Sprott Silver has gained quite some silver bullion from its recent follow on offering and raised a substantial amount of cash.  I estimate their cash assets position at around $15,167,600, which is a notable increase over their cash of $1,779,270 which it had in February.  And the silver bullion in the fund has increased from 48,788,515 to 52,483,526 troy ounces.  The number of shares outstanding has also increased from 127,331,218 to 139,631,218 or roughly by 12,300,000.

Here is the press release on Sprott Silver's follow on unit offering which has just completed.

Interestingly enough the Sprott Silver Trust is showing a slightly negative premium to its NAV, as compared to a +2% premium in February.  I suspect this reflects some discouragement with regard to silver than to the trust itself.

The gold/silver ratio has fallen from 80+ to 76 which is still rather high historically.  I do think that there are some reasons for this, regarding the state of the 'free float' of gold bullion in London, with some side effects appearing elsewhere in NY and in some of the funds as mentioned.  Silver is tight but apparently not as much as gold.  Still, the central banks own little silver, and so supplying bullion for 'attitudinal and expectation adjustments' for the management of perception is not as readily available.  Excepting of course the large silver bullion stash that is being held by JPM, which seems to sometimes do heavy lifting for the Fed in the markets.

I get the sense that the Fed is caught in a credibility trap, and that they are managing a scenario of financial bubbles and busts that is highly counterproductive and the result of their group thinking and heavy bias to the wealthiest few and their banking system.   After all, the Fed is their creature whether we like to admit it or not, and the linkages and much used revolving door between Wall Street and the halls of power in this country is well established.  And as always, the enablers will speak nothing to power but what they wish to hear, and what they wish their courtiers to say to the rest of us, with a few notable exceptions.

I doubt very much that there will be a sustainable recovery in this country without serious and significant financial and political funding reforms.  And the established status quo, including the so called liberals who are captured by the system of privileged treatment and positioning itself, is dead set against it.

Thank you for all your kind words and messages.  I am hopeful that our Mary will transfer from hospital to an in-patient care rehabilitation facility for the weakness on her right side and for the 'fluent aphasia' in her speech.   Time will also be a great healer as the brain swelling subsides even more, but some targeted therapy looks to be necessary.  We all miss her and she misses us.  A home without a wife and mother is just a house, because she is its heart.

Here is the previous spreadsheet from February of this year.