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.

Gold Daily and Silver Weekly Charts - Why Don't You Do Right

"And finally, in our progress towards a resumption of work, we require two safeguards against a return of the evils of the old order.

There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people's money."

Franklin Delano Roosevelt, First Inaugural Address, 4 March 1933


"All political thinking for years past has been vitiated in the same way. People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome."

George Orwell, 'December Letter,' Partisan Review, Winter 1945

Today was another boring day in the Homeland.

There were no deliveries at The Bucket Shop yesterday.

The usual dribbles of bullion went in and out of the warehouses.

Gold and silver prices generally oscillated around their current price levels.

Both precious metals are utterly oversold.

Below the charts is a classic song from Peggy Lee.  It became a hit in 1942 with Benny Goodman and was included in the movie Stage Door Canteen.  It sold a million copies and brought her to national recognition. It is shown as the second video below.

She cut the more mellow version, the first video below, with her husband and guitarist Dave Barbour in 1947.  The video is from 1950.  Her vocalization is much more personal and confident, and helps to support Barbour's ice-cold licks on the guitar.

It is not her most famous recording of course, as she is always associated with Fever.

I'll bet you did not know that this song was originally recorded as 'The Weed Smoker's Dream' by the Harlem Hamfats in 1936. I did not.  I found it fascinating that the Harlem Hamfats are really a Chicago jazz group, and the recording featured below was purchased from a British musical instruments, sheet music and apparently record dealer, Saville Pianos on Holloway Road N7 London. The Vocalian Origins of Jazz collection is a 78 RPM series of records issued in 1951 by an American company.

The song was rewritten and released as 'Why Don't You Do Right' by Lil Green in 1941 with Big Bill Broonzy.  As you can hear, it has a distinctive rhythm and blues lilt that sounds more like the 1947 cut by Peggy Lee than the big swing band version by Benny Goodman.

Many others have also recorded this song, including one of my favorite singers Julie London. You may have seen a version of it in 'Who Killed Roger Rabbit.'  But Peggy Lee's rendition still sounds the best of them all to me.

The lyrics sound like something the Banks will say when the next crisis brings them around asking for your money in another bail-out or bail-in.

You had plenty money, 1922
You let other women make a fool of you
Why don't you do right, like some other men do
Get out of here and get me some money too

You're sittin' down and wonderin' what it's all about
You ain't got no money, they will put you out
Why don't you do right, like some other men do?
Get out of here and get me some money too

If you had prepared twenty years ago
You wouldn't be a-wanderin' now from door to door
Why don't you do right, like some other men do?
Get out of here and get me some money too

I fell for your jivin' and I took you in
Now all you got to offer me's a drink of gin
Why don't you do right, like some other men do
Get out of here and get me some money too

No, you don't think so?  You do not think that they would dare propose a 'bail-in' to save Wall Street again?

The Banks own more politicians and judges than Don Vito Corleone.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Policy Errors, Other Peoples' Money, and Fear

What we have freed ourselves of, however, is any genuine consciousness of how we might look to others on this globe. Most Americans are probably unaware of how Washington exercises its global hegemony, since so much of this activity takes place either in relative secrecy or under comforting rubrics.

Many may, as a start, find it hard to believe that our place in the world even adds up to an empire. But only when we come to see our country as both profiting from and trapped within the structures of an empire of its own making will it be possible for us to explain many elements of the world that otherwise perplex us.

Chalmers Johnson


In England, a century of strong government has developed what O. Henry called the stern and rugged fear of the police to a point where any public protest seems an indecency.

George Orwell

Let's see if they can keep this bubble rolling.

As long as the volumes stay light and the Fed and the regulators stay loose, I suspect that they can.

Have a pleasant evening.