Comparing the Central Fund of Canada to the Gold and Silver ETFs (CEF, GLD, IAU, SLV)

Includes: CEF, GLD, IAU, SLV
by: SA Editors

Interesting comment from Alan Abelson in this weekend's Barron's about the Central Fund of Canada (CEF), which holds gold and silver bullion, as an alternative to the gold ETFs (GLD and (IAU) and the upcoming silver ETF (SLV):

One additional note on Central Fund of Canada (NYSEMKT:CEF), a closed-end fund that invests in gold and silver bullion, mentioned here last week. An old friend points out that the tax treatment of Central Fund of Canada is more favorable than for the gold-based ETFs (tickers GLD and IAU) and the coming silver ETF. CEF, like other mutual funds, gets capital-gains treatment, so long-term gains are taxed at a maximum of 15% by Uncle Sam. The ETFs are taxed as collectibles, which means a rate as high as 28%.

The premium on CEF had shrunk to 3.91% over net asset value as of Thursday, according to, from over 11% the previous week. For taxable accounts, CEF's tax privilege could explain the premium. Not that logic enters into tax law; it's hard to justify a mutual fund being granted a more favorable tax treatment than the investments it holds. But so be it.

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