Discounts And Dividends In Gold Closed-End Funds

| About: SPDR Gold (GLD)

Summary

7.4% discount on physical gold and silver.

14.3% discount on miners.

10.6% 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.

Last week gold price closed out of its 10-month range to the downside. It is just below $1200 when I write this, a major pivot zone for more than 3 years.

Gold price weekly chart (finviz.com)

Price action points to the next support about $100 lower, so does the perspective of a rate hike this month. On the other side, seasonality is historically supportive, and the short interest of commercial hedgers (who showed some skills in anticipating price moves in the last few years) is in indecision zone. These short positions have shrunk considerably since a multi-year high in July, but are still large enough to unlock large profits at lower prices for their owners.

Commitment of Traders (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 12/1/2016.

Tickers

+Premium -Discount

Annual Fees

% of NAV in bullion*

Central Fund of Canada

CEF

-7.4%

0.32%

99.7% (gold 61%, silver 38.7%)

Sprott Physical Gold Trust

PHYS

-0.68%

0.35%

99.8%

Sprott Physical Silver Trust

PSLV

+0.08%

0.45%

98%

Sprott Physical Platinum & Palladium Trust

SPPP

-1.69%

1.17%

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 7.4%. I don't recommend a long-short arbitrage trade. Borrowing and margin costs may erase expected gains if the trade lasts too long. CEF has traded at a premium between 2009 and May 2011, and has been at a discount most of the time since then.

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

Global Gold Natural Resources & Income Trust

GGN

-2.09%

10.60%

1.26%

Natural Resources Gold & Income Trust

GNT

-4.18%

8.72%

1.36%

ASA Gold&Precious Metals

ASA

-14.27%

0.36%

1.64%

ASA is the best deal regarding price and value. GGN is much more attractive for dividend investors, with additional risks from embedded option strategies.

ASA top stock holdings:

Source: Bloomberg.com

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.

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