Discounts And Dividends In Gold Closed-End Funds

|
About: Sprott Physical Gold and Silver Trust (CEF), ASA, Includes: GDX, GGN, GLD, GNT, PALL, PHYS, PPLT, PSLV, SLV, SPPP
by: Fred Piard
Summary

2.8% discount on physical gold and silver.

7.4% discount on miners.

13.4% dividend with option strategies.

This series of articles does not aim at predicting where precious metal prices will go, but at showing investors where they can get more value for their money.

Gold is in the middle of the $1200-1300 range, 2 major support and resistance zones since 2013. Several factors have been pointing to a higher price since last week. Seasonality will be supportive until February, the net short positions of Commercial Hedgers have been drastically cut after reaching an extreme value, and short-term bullish chart patterns have been validated in all precious metals.

Gold weekly chart (source: finviz.com)

I don't know if it is a good time to buy precious metals as an investment, but there is no bad time to accumulate small amounts as an insurance. For this purpose, some closed-end funds are an alternative to GLD, SLV, PPLT and PALL. The next table shows discounts, premiums and real metal allocated for some Canadian funds on 11/1/2016.

Tickers

+Premium -Discount

Annual Fees

% of NAV in bullion*

Central Fund of Canada

CEF

-2.8%

0.45%

99.2% (gold 60.5%, silver 38.7%)

Sprott Physical Gold Trust

PHYS

+1.1%

0.35%

99.7%

Sprott Physical Silver Trust

PSLV

+0.87%

0.45%

99.7%

Sprott Physical Platinum & Palladium Trust

SPPP

-1.41%

0.5%

99.8%

*complement is in certificates and cash assets.

Premiums and discounts are calculated with the price of latest LBMA fixing (12:00 p.m. for silver, 3:00 p.m. for gold).

CEF discount is providing a safety margin of 2.8%. In my opinion, it is not enough to prefer CEF over any physical gold fund trading at spot price or very close to it (the best products are on the Swiss market). It will probably be impossible to sell CEF at a premium until gold enters a new bull market.

Investors preferring stocks and incomes may consider GAMCO Funds. Leverage and option strategies add some risks compared to a gold mining ETF like GDX, but they also provide high dividend yields. Holdings are mainly in mining but also in oil and gas. ASA is another closed-end fund in precious metal companies.

Tickers

+Premium -Discount

Dividend Yield

Annual Fees

GAMCO Global Gold, Natural Resources & Income Trust

GGN

+2.16%

13.44%

1.15%

GAMCO Natural Resources Gold&Income Trust

GNT

+5.36%

10.7%

1.36%

ASA Gold&Precious Metals

ASA

-7.44%

0.28%

1.64%

ASA looks a better deal than GGN and GNT regarding the current discounts. GGN is much more attractive for dividend investors, with additional risks from valuation and embedded option strategies.

ASA top stock holdings (source: Bloomberg.com):

If you want to be notified of monthly updates, click "Follow" at the top of this article.

Disclosure: I am/we are long PPLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.