CEF a steal at 9% discount
Posted: Mon Jul 13, 2015 12:55 am
The closed end fund CEF looks like a steal at 9% discount to NAV. I bought some on Friday for my VP since I think gold and silver are both underpriced. Especially given the 9% discount, it seems incredible.
I've been considering buying some physical silver (for fun and a little VP play) and been watching the silver markets the last few months. Lately, there's a shortage of physical silver and the premiums on physical silver have shot up enormously. We're talking 20% premiums on 1 ounce coins WHEN you can find them. Even 100 ounce bars are going at a 10% premium. I've also been following precious metal deals on the internet and even though gold has dropped $100 an ounce in the last few months or so, the number of deals have sharply declined in the last few weeks. It used to be that there'd be a special for american gold eagles at $20 above spot. Now the "deal", when they even offer them, is $50 above spot. Seems like physical metals are in demand and paper metals are taking a dive. Which is likely to mean paper assets will follow in suit, upwards.
Compare these recently hiked premiums for physical to a 9% discount for CEF, which is 60% gold and 40% silver and CEF seems like a steal. If you're willing to hold it until gold and silver go back up, I expect the discount to disappear and you'll gain both the gold/silver increase PLUS the discount-related gain.
Given what happened with GTU recently, it's possible CEF will be forced into a 5% discount redemption policy as well, which will instantly reduce the discount from 9% to 5%, as it did with GTU. Also, if silver shoots up, we can see a premium to the NAV, as happened a few years ago in CEF.
On a side note, if you like conspiracy theories (and I do!!) there's talk that JPMorgan and other banks have been naked short selling paper gold and silver in an attempt to manipulate the price down. That can only last so long...
I've been considering buying some physical silver (for fun and a little VP play) and been watching the silver markets the last few months. Lately, there's a shortage of physical silver and the premiums on physical silver have shot up enormously. We're talking 20% premiums on 1 ounce coins WHEN you can find them. Even 100 ounce bars are going at a 10% premium. I've also been following precious metal deals on the internet and even though gold has dropped $100 an ounce in the last few months or so, the number of deals have sharply declined in the last few weeks. It used to be that there'd be a special for american gold eagles at $20 above spot. Now the "deal", when they even offer them, is $50 above spot. Seems like physical metals are in demand and paper metals are taking a dive. Which is likely to mean paper assets will follow in suit, upwards.
Compare these recently hiked premiums for physical to a 9% discount for CEF, which is 60% gold and 40% silver and CEF seems like a steal. If you're willing to hold it until gold and silver go back up, I expect the discount to disappear and you'll gain both the gold/silver increase PLUS the discount-related gain.
Given what happened with GTU recently, it's possible CEF will be forced into a 5% discount redemption policy as well, which will instantly reduce the discount from 9% to 5%, as it did with GTU. Also, if silver shoots up, we can see a premium to the NAV, as happened a few years ago in CEF.
On a side note, if you like conspiracy theories (and I do!!) there's talk that JPMorgan and other banks have been naked short selling paper gold and silver in an attempt to manipulate the price down. That can only last so long...
