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Summary

  • Gold and silver prices are consolidating for a couple of weeks.
  • Central Fund of Canada and Central Gold Trust offer a better discount than last month.
  • Trying to arbitrage this discount might not be a good idea.

Gold is in correction mode for two weeks, and silver for one month. Seasonality is not supportive any more for precious metals (read here). The fundamental picture remains unclear: inflation stays low, production prices are not a safe way to estimate a bottom, and the concentration of future contracts by a few major players has not changed. Miners are following the move down (GDX, GDXJ). I wrote here in February that it was a bit premature to call for the end of the precious metals bear market. One month later, gold is still above its 200-day simple moving average, but silver fell back below.

My aim here is not to make a prediction, but to show investors where they can find the best value for their money. It might be or not a good time to invest in precious metals, however there is no bad time to buy reasonable amounts as insurance. The next table shows discounts, premiums and real metal allocated for some Canadian funds on 3/24/2014. They are an alternative to ETFs like GLD, SLV, PPLT, PALL.

Data: 3/24/2014 on close

Tickers

+Premium -Discount

Annual Fees

% of NAV in bullion*

Central Fund of Canada

NYSE: CEF

TSX: CEF.A

-6.4%

0.45%

99.3% (gold 58.4%, silver 40.9%)

Central Gold Trust

NYSE: GTU

TSX: GTU.UN

-5.6%

0.35%

97.8%

Sprott Physical Gold Trust

NYSE: PHYS

TSX: PHY.U

-0.29%

0.35%

99.3%

Sprott Physical Silver Trust

NYSE: PSLV

TSX: PHS.U

+1.9%

0.45%

99.4%

Sprott Physical Platinum & Palladium Trust

NYSE: SPPP

TSX: PPT.U

+2.95%

0.5%

100%

*complement is in certificates and cash assets.

CEF and GTU discounts are up since last month, providing an additional safety margin in case metal prices fall lower. Sprott funds are less attractive. An arbitrage, for example buying GTU and shorting GLD, is not a so good idea. Discounts in CEF and GTU have been oscillating between 4% and 8% for two years. At the end, borrowing costs might eat the profit and possibly more.

Source: Precious Metal Canadian Discounts (March Update)