Looking at Sprott and Central Fund of Canada Physicals

Jan. 09, 2012 2:02 PM ETPSLV, PHYS, CEF, GTU
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Long Only, Special Situations, Medium-Term Horizon, Dividend Investing

Contributor Since 2007

I am a software developer.
I might need to go get my eyes checked soon because I can't believe what I am seeing.
Sprott Physical Silver, PSLV, has a premium of 32.25%.
Now, I would never own GLD or SLV.  I only hold precious metals with Sprott or Central Fund of Canada.  I don't consider there to be any difference between Sprott or Central Fund, in the reliability of their holdings of gold and silver.
But there are some unbelievable differences in the Net Asset Values (NAV) of their funds.
Let's say you want to hold gold and silver, and are going to invest $100,000.
And let's assume the following premiums to NAV:
Sprott Silver, PSLV: 32.25%
Sprott Gold, PHYS: 6.40%
Central Fund's CEF (54.1% Gold / 44.7% Silver): 0.3%
Central Fund Gold, GTU: 2.5%
And let's assume Gold at $1616 per ounce.
Silver at $28.68 per ounce.
$100k in CEF, with the 0.3% premium-to-NAV would give:
(100,000 * 0.541) / (1616 * 1.003) = 33.377 ounces of gold
(100,000 * 0.447) / (28.68 * 1.003) = 1,553.9 ounces of silver
$100k at Sprott, $50k in PSLV and $50k in PHYS would give:
(50,000) / (1616 * 1.064) = 29.08 ounces of gold
(50,000) / (28.68 * 1.3225) = 1,318 ounces of silver
Ouch!  Same amount of money, but with Sprott you get 4.297 LESS ounces of gold and 235.9 LESS ounces of silver.  I would recommend buying CEF, or at least buy GTU if you are partial to gold.

Disclosure: I am long CEF, PHYS.

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