NAV Premiums of Certain Precious Metal Trusts and Funds - What Is Truth?

"Sin has many tools, but a lie is the handle which fits them all."

Edmund Burke


"A noble man compares and estimates himself by an idea which is higher than himself; and a mean man, by one lower than himself. The one produces aspiration; the other ambition for power or wealth, which is the way in which a vulgar man aspires."

Marcus Aurelius

We live in an age when breaking the rules for personal profit, cheating if you will, and telling lies about it has become an accepted means of acting in public, quietly fashionable, almost admirable to some, provided that the lying is done skillfully well more as a distortion than an outright whopper, and with style.

I have noticed of late that some seem to lie now quite freely almost as a convenience, in imitation of their 'betters,' those more verbally acute and skillful in the deceptive arts. And when caught out in a factual lie, seem offended that you would take notice of it. They are ashamed, not of the lie, but of having done it poorly. And they try to become better at it, more clever.

It seems as though even more have been given over passively to this sort of self-deception, perhaps not originating the falsehoods as such, more from a lack of creativity than scrupulous honesty. They will pass along the lies of others aggressively and without shame, even when they are shown to be objectively false. What matters is that the lies flatter us, our biases, our positions, and our passions. Team spirit. But what team?

I had a friend, who to all appearances and reputation was an upstanding person and quite proud of it, who passed along things that were blatantly false, unkind, and quite nasty to others. I implored him to stop sending these things to me. And when it was shown to be false, in a fairly indirect and non-confrontational manner for the sake of friendship, he was quick to respond indignantly, 'what is truth?'

This is ironically the quote that marked Pontius Pilate's great moment of moral failure for the sake of personal expediency. I am not sure what was more injured in this: our long friendship which this ended, or his character as a man.

It is not that most of our sins are so great; they are not, for in most things we do not rise to greatness in any sense of the word. Rather, it is that they obtain for us so little while costing us so much. What does it profit a man indeed.

And there is no reward in constantly marking the failures of others, but a pitfall.   It is better that we mark our own shortfalls, which are many. But at some place we must stand our ground, stand for something, some principle, even if we do so in fear and trembling for our own weaknesses and poor grasp of what is true.

What is truth? This could be the vulgar motto for the generation that is passing. And looking to our prescriptive leadership, could we see any better examples of vulgarity?    Truth is whatever we say it is, and woe to any who dare to disagree with the lie, or bring any light to our fanciful imaginings. The children of the darkness of this world will hate them for it.  For they are given over to greed and power, not truth.

The Central Fund's NAV discount has contracted quite a bit from what it had been.

Sprott Gold has raised its cash by selling additional units.

Sprott Silver is priced at a slight discount, which is a bit unusual given its historical norms.

The gold/silver ratio is still a bit high, but not as high as it had been.

The rally in gold is being driven by a flight to safety, among other things. Although Year-To-Date silver is still leading gold on a percentage basis, and many other financial assets as well.

We will be hearing from the FOMC within the hour.

Ubi sunt? The mighty rise and are fallen, but the word and the spirit endure.

NAV Premiums of Certain Precious Metal Trusts and Funds

Rather high ratio of gold/silver.

Interesting that the Sprott Gold Trust is holding a better premium than Sprott Silver.

NAV Premiums of Certain Precious Metal Trusts and Funds

I find it interesting that the Sprott Gold Trust is demanding a small premium whereas their silver trust has a small discount. That is the opposite of how things have been historically.

Other than that, it is safe to say that even with its rally, the precious metals are hardly enjoying an overexuberance in the market.

NAV Premiums of Certain Precious Metal Trusts and Funds

Modest premiums to say the least, especially given the sharp rally of the past few days.

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.

NAV Premiums of Certain Precious Metal Trusts and Funds

The Central Fund of Canada is going to need to raise short term cash levels at some point. Historically they have done this through secondary offerings.

NAV Premiums of Certain Precious Metal Trusts and Funds - Capture and Crash

The gold/silver ratio is about 80 which is historically very high.

I believe that this is attributable to the price leadership of gold because of a flight to safety from economic uncertainty and policy errors such as negative interest rates.

Further, I believe that there is a looming short squeeze in the physical gold market which, if unaddressed by reforms and market pricing, will cause a dislocation in the global bullion markets.

I am obviously less certain about the second reason, but the data lend themselves to this interpretation. And I believe further that failing to address this mispriced risk is a failure of the regulators and the exchanges to rein in the excesses of the 'synthetic gold' derivative trade.

This is not an incidental lapse, but at the heart of their responsibilities in oversight, and further symptomatic of the financial crises which we have been suffering since at least 1999. Indeed, an environment of Too Big To Fail banking entities and captured and complacent regulators is a pernicious influence on the health of the economy and a barrier to a sustainable recovery.

When this trade cracks open, risking collateral damage in the banking system, there will be those who will say that 'no one could have foreseen this coming.' This is nonsense. It is hard to see only because those whose responsibility it is to protect the public against such abuses is standing idly by while it happens, allowing the insiders and perpetrators to hide their actions and its consequences from the rest of the market for the sake of outsized, short term personal profits.

NAV Premiums of Certain Precious Metal Trusts and Funds

The gold/silver ratio is historically rather high at 78.5.

NAV Premiums of Certain Precious Metal Trusts and Funds

Having completed the acquisition of the Central Gold Trust, the Sprott Physical Gold Trust now reflects that additional bullion and the cash assets obtained through the transaction through the disposition of bullion.

Obviously the Central Gold Trust is no longer listed and has ceased to exist.

The Sprott Silver Trust has sold some bullion to raise cash and is now well funded.

The Central Fund must address their cash position, either through a bullion sale or a secondary offering.

NAV Premiums of Certain Precious Metal Trusts and Funds

More gold (13,439 troy ounces) was redeemed out of the Sprott Physical Gold Trust since I last recorded this on December 21.

The cash balance in Sprott Silver is now once again negative.

The cash balance in the Central Fund is now $235,637 and so they will have to begin their plans to increase it through a secondary offering or some other means as they can.

Below is the prior NAV Report.

NAV Premiums of Certain Precious Metal Trusts and Funds

Gold and silver have bounced back from last week's 'quad witching equity option expiry slump' in prices.

Let's see if they can get something going from a potential double bottom.

NAV Premiums of Precious Metals Funds and Trusts - Quad Witching Expiry Tomorrow

It appears that the Central Gold Trust, Sprott Gold and Sprott Silver have all sold some bullion to return their cash assets back into the black.

The only one that did not have to sell was the Central Fund. Although it has the currently worst discount to NAV, as it generally does, it now has one of the better cash to expense positions perhaps of these.

Weathering the storm and all that.

NAV Premiums of Certain Precious Metal Trusts and Funds

NAV Premiums of Certain Precious Metal Trusts and Funds - Stay Right, Sit Tight

“If you shut up truth and bury it under the ground, it will but grow, and gather to itself such explosive power that the day it bursts through it will blow up everything in its way.”

Émile Zola

The above quote was on the header of this blog the other day.

I mentioned that gold was oversold and that sentiment was at a washed out low.

The question to ask is not, why is gold going higher today? It is obviously a short squeeze that was set up and fueled by a concerted effort to push the prices much lower to unsustainable levels for the past two weeks.  I think there were multiple motivations for this.

For some, it took the luster off gold as the ECB and other central banks continue printing money, fruitlessly, but they do.  And for others, it was a chance to knock down the December open interest, given the excessive number of claims on a shrinking supply of deliverable bullion.

Silver has been moving freely at The Bucket Shop, thanks in large part to CNT, but physical gold has been in a virtual lockdown.  I include the scorecards for this 'active' month of December below.

The real question to ask is why do we permit such blatant price rigging and market manipulation, without regard for the real world consequences?

I will not say that this is 'over.' The markets have not suddenly become transparent and honest. And the hedge funds and some individuals are getting a punishing lesson in that this morning, being suckered into a bad bet by the usual jokers and their enablers, who spread stories designed to manipulate sentiment.

But increasingly there is a recognition, of almost one person at a time, that this pricing is heading towards a dislocation because of a long term action to control it against the market trend.

If Gresham's Law has any validity at all, and I firmly believe that history shows that it does, and if the markets stay 'free' enough to allow people to buy and sell things at anywhere near a voluntary price, then gold is going to continue to flow from West to East, and will not cease until the gold rigging ceases its operations.

"When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."

Real gold is flowing from West to East. And what it is leaving behind is a pile of 'synthetic' gold positions and IOUs.

While I am glad to see this rally, I will get excited when gold starts going up 100$ at a time,  mostly overnight.

And you do not wish to be on the wrong side of that when it comes, although there is little enough security in this world, when lawless men are allowed to have their way.  And that raises the all important question of our time, of transparency and reform.

Stay right, and sit tight.

NAV Premiums of Certain Precious Metal Trusts and Funds - Another Gold Redemption

There was another gold redemption from the Sprott Physical Gold Trust of 16,467 troy ounces.

However one may wish to account for this, it is noteworthy that there have been no similar redemptions from the silver trust.

This is consistent with the overall experience of Western funds and trust which have been seeing the outflows of gold bullion for the past couple of years, but not of silver.

As you may recall, I have formed the hypothesis that the trading at the Comex in 'synthetic gold,' or highly leveraged paper gold claims, is creating a situation in which risk of a failure to deliver at current prices in the broader, global gold markets will be more likely to occur than in a well-managed and regulated market.

Or more bluntly, the price rigging of gold at The Bucket Shop is setting up the gold market for a severe dislocation when the artificial pricing scheme collapses.

I doubt it will be acknowledged as a 'fraud' since it involves systemically 'important' financial organizations and the acquiescence of bureaucrats caught up in a credibility trap.

The negative estimated cash balances on both Sprott funds continued to increase. One might assume that the Sprott funds have decided that now is not a good time to sell metal to raise funds.

Prior posting from the 27th of November 2015

NAV Premiums of Certain Precious Metal Trusts and Funds

NAV Premiums of Certain Precious Metal Trusts and Funds

Both Sprott Funds are estimated to have negative cash balances now. Gold has slightly gone negative but their silver trust continues to go a bit more. But as you can see, this is a tiny percentage of the overall fund assets. Still, it seems a bit odd.

Gold and silver had a 'flight to safety' bounce today as did most less risky assets in the aftermath of Turkey shooting down a Russian jet, with Syrian Turkmen then executing the pilots as they descended via parachute.

Stocks are struggling to go green. I suspect that a rally was in the gameplan for the Thanksgiving holiday week as it often is, but international events have intruded.

We must show that nothing can deter the financial asset bubble in the course of its wealth transferring rounds.

NAV Premiums of Certain Precious Metal Trusts and Funds

I found it interesting that in yesterday's Comex delivery report, Nova Scotia took delivery of 43 x 5000 ounces contracts, about 215,000 ounces of silver bullion, for their 'house account,' at the price of 14.08.  I include that particular CME report below.

Apparently the Central Gold Trust has proposed a conversion of the Trust into an ETF, rather than accept the acquisition offer from Sprott. You may read that proposal as a PDF document. 

The Sprott Funds are mildly negative in price to their NAV, which is the 'new normal' in this bear market leg in precious metals.

What is not so normal, at least in my recollection, is the deepening negative cash balance which I have estimated for Sprott Silver at a little over $430,000.   And from the low level of cash in its account it looks like Sprott Gold is going to be following them soon, unless provisions are made to raise cash.

As you may recall, the Sprott underwriter Morgan Stanley gets a 4% cut on new offers of units, which has been the usual way in which Sprott has raised funds.  With the premiums close to negative, they cannot execute such an offering without 'diluting' the value of the fund in that offering, which they have pledged in their prospectus that they will not do.

So it appears that selling bullion is the only way to raise the required funds.  I have this from third parties, but Sprott has never said anything otherwise or objected to this interpretation.

Another interesting factor in the Sprott funds is the redeemability feature.  Although it has not happened with silver, there have been a number of redemptions of gold bullion out of the Sprott gold Trust over the past couple of years.  That is a good thing, that the process works, and that one might obtain their physical gold for private safekeeping.

But one might wonder what would happen if there was a 'run on physical gold' as some conjecture might occur, given the divergence in pricing between paper and physical.    According to an informal source, there is no provision in the funds to block, slow down, or attempt to prevent any redemption of the gold or declare force majeure.

The counterbalance for this is, of course, the market.  In order to redeem bullion, one must buy the units in the market at a certain price.  And if someone started buying up the Trust units in size, the price of those units would probably adjust to an increasing positive premium which would mitigate the attractiveness of a mass redemption.  And in the case of a 'run on bullion' I would imagine that holders of units would refuse to sell.  But nibbling at the bullion, as it is on almost all Western gold funds, has occurred.

I include the 'Total Holdings' of the Funds and ETFs for gold below to show the decline in bullion inventory.   And to pre-emptively respond to the misinformation of the bullion banks' gold trolls, who like to claim that this rise and fall in gold inventory is merely a matter of price, I include the same time periods for silver bullion as well.  Nine out of ten investors might notice that silver has had a steep decline in price from its all time highs as well.

One cannot take a single data point alone, and even a cursory examination of the bullion flows globally shows a massive movement of gold bullion from West to East, with some significant declines in the 'free float' of gold in some traditionally strong Western markets, such as London for example.

And the outflows from the Asian markets into strong hands on the mainland and the Western exports to them have been absolutely astonishing.  That the financial media and analysts ignore this, with some even denying it overtly, is shocking I suppose, unless you have been paying close attention to some of their more egregious service to the speculative financial interests for the last fifteen years.

By way of disclosure I own no shares in any of these Funds and ETFs at this time, and receive no money or gratuities from any of the funds which I discuss.  I have owned all of them from time to time. I have owned most of the mining stocks from time to time, except for the more obscure 'juniors.'  I do not prefer one over the other so much as each has its place and use in a portfolio.

As I have indicated recently I am cash heavy for the moment in my short term trading, waiting for the market to provide some additional information to prompt some action.  This is normal now because I am no longer a very active trader.  That is a younger man's game. I prefer to take more intermediate term positions and in size.

My long term holdings remain as they have been.

NAV Premiums of Certain Precious Metal Trusts and Funds

The gold/silver ratio is at an historically high 75.

There were no changes made to address the growing negative cash position at Sprott Silver.  That is something I do not recall seeing before.

CEF is carrying a fairly deep discount, the rest not so much.  Central Gold Trust is benefiting from the Sprott takeover bid.

NAV Premiums of Certain Precious Metal Trusts and Funds - Killing Off Cash, Negative Rates

Approximately 11,293 troy ounces (only about .35 tonnes) of gold was redeemed from the Sprott Physical Gold Trust in return for 1,365,920 units since the last time I updated this on October 25th.  That prior chart is included below the current data.

You may make what you will of this, but the fact remains that there is little redemption of units for silver.  And there is a general decline in gold held by Western ETFs and Funds, and heading to Asia. It could also be some sort of arbitrage, but I am struggling with that one, again because it only seems to be happening with gold.

Or perhaps the Chia Pet or Pet Rocks people are diversifying their product offerings.

Business Insider Australia has an interesting article, Killing off Cash, and Imposing Negative Interest Rates.   

Janet Yellen did not rule this out in her congressional testimony today.  No wonder the wealthy are stashing their cash in offshore havens.

The cash balance in the Sprott Physical Silver Trust has gone more negative, as short term payments are most likely delayed, and/or short term operating loans taken.   It appears that another sale of silver bullion to raise cash for the fund may be in the works, pending the outcome of their acquisition proposals perhaps.

There was a marked decline in the cash assets of the Central Fund of Canada.  They paid a 1 cent per Class A Share annual dividend on October 28, which would account for about $2,544,327 of that.