Discounts And Dividends In Gold Closed-End Funds

| About: ASA Gold&Precious (ASA)

Summary

6.8 % discount on physical gold and silver.

13.28 % discount on miners.

11.43 % dividend with 10% discount on holdings.

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 started 2017 below $1,200, its major pivot zone since December 2013.

Gold price weekly chart (finviz.com)

Short-term price action points to the upside and seasonality is still supportive, but the rising rates and dollar index are not. The short interest of commercial hedgers (who have been good at anticipating price moves in the last few years) has shrunk in one month, but it is still larger than its average in 2014 and 2015. I wrote 13 months ago before the 2016 rally that precious metals insiders had priced a bottom, it is not so clear now.

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 1/3/2016.

Tickers

+Premium -Discount

Annual Fees

% of NAV in bullion*

Central Fund of Canada

CEF

-6.8%

0.32%

99.7% (gold 61.3%, silver 38.4%)

Sprott Physical Gold Trust

PHYS

-0.79%

0.35%

99.85%

Sprott Physical Silver Trust

PSLV

+0.40%

0.45%

99.7%

Sprott Physical Platinum & Palladium Trust

SPPP

-1.30%

1.17%

99.9%

*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 6.8%. 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

-10.05%

11.43%

1.26%

Natural Resources Gold & Income Trust

GNT

-6.09%

8.80%

1.36%

ASA Gold&Precious Metals

ASA

-13.28%

0.35%

1.64%

ASA has the best discount, but GGN looks the best combination of discount and dividend when I write this, with additional risks from embedded option strategies.

GGN top holdings (source: Bloomberg.com):

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GGN over 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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