Gold and silver have confirmed their rebound in February. Between the 1st and the 21st, GLD is up 6.2% and SLV, 13.7%. The rally is also impressive for miners: in the same period GDX is up 13% and GDXJ, 21.3%. Gold and silver are for the first time in 12 months above their 200-day simple moving averages. From a technical point of view, the outlook is much better, but it is a bit premature to call for the end of the precious metals bear market. The supportive seasonal pattern is over now (read here). Last year, gold and silver have also rallied above their 200-day SMA in January and February before plunging again. From a fundamental point of view, the picture is still unclear: inflation stays low, stocks are bullish, production prices are not a safe way to guess a floor, and a few major players still have the power to drive the futures market where they want.
My aim here is not to predict where gold will be in one month or one year, but to show investors where they can find the best value for their money in case they decide to buy. I have no idea if it is a good time to invest in precious metals, but there is no bad time to build a position step by step as an insurance. The table below shows discounts, premiums, and real metal allocated for some Canadian funds on 2/21/2014. They are an alternative to ETFs like GLD, SLV, PPLT, PALL.
Data: 2/21/2014 on close
% of NAV in bullion*
Central Fund of Canada
99.2% (gold 56.8%, silver 42.4%)
Central Gold Trust
Sprott Physical Gold Trust
Sprott Physical Silver Trust
Sprott Physical Platinum & Palladium Trust
*complement is in certificates and cash assets.
CEF and GTU discounts are down since last month, but still provide a safety margin in case metal prices fall back. PSLV, with a premium close to 4%, is less attractive. An arbitrage, for example buying GTU and shorting GLD, is a low-risk trade, but don't expect a sure profit after carry costs: discounts in CEF and GTU have been moving randomly between 4% and 8% for two years.