Gyroscopic Investing

If you like GTU, now might be a good time to pick some up.

I'm not sure about this, but it seems like the premium for GTU tends to go up when gold is rising quickly and down when gold is taking a dive. 

Is this the case?  And if so, that would make a good fund for the PP, right?

Adam1226 wrote: I'm not sure about this, but it seems like the premium for GTU tends to go up when gold is rising quickly and down when gold is taking a dive. 

Is this the case?  And if so, that would make a good fund for the PP, right?

I don't fully understand all the dynamics of the premium or discount to NAV with GTU, but if I can buy the fund for 2%+ below NAV, I think that is very appealing.  It may go lower, but I believe that over time it will return to NAV, or perhaps show a premium as it has in the past.

WOW!

3.9% discount to NAV today.

http://www.gold-trust.com/asset_value.htm

MediumTex wrote: WOW!

3.9% discount to NAV today.

http://www.gold-trust.com/asset_value.htm

It seems that they have fundamental issues with arbitrage. Not sure that's really an attractive feature.

seems closed end funds have same issue...seems its perfect for the PP when rebalancing (sell hi, buy low)...am i missing something?

murphy_p_t wrote: seems closed end funds have same issue...seems its perfect for the PP when rebalancing (sell hi, buy low)...am i missing something?

Gold is supposed to be low now? Gold is at an all time (nominal) high. Some PP's are within a few percentage points of rebalancing out of gold and GTU is sucking wind.

Gumby,

I would not be interested in GTU unless it was trading below NAV.

The chart above suggests that a 3.9% discount to NAV is a safe time to buy.

MediumTex wrote: Gumby,

I would not be interested in GTU unless it was trading below NAV.

The chart above suggests that a 3.9% discount to NAV is a safe time to buy.

I'm not saying it's a bad buy. I'm just saying that the premium is waay unstable. Something weird is going on there, and it's been happening for awhile...

http://www.goldstockbull.com/articles/c ... ent-227867

Gumby wrote:

MediumTex wrote: Gumby,

I would not be interested in GTU unless it was trading below NAV.

The chart above suggests that a 3.9% discount to NAV is a safe time to buy.

I'm not saying it's a bad buy. I'm just saying that the premium is waay unstable. Something weird is going on there, and it's been happening for awhile...

http://www.goldstockbull.com/articles/c ... ent-227867

I'm okay with the premium being unstable, as long as I am buying near the bottom of the historical range.

Over the last few days I have been transitioning my tax-deferred holdings of IAU into GTU.  Now seems like a good time to make this move and it's possible that the GTU premium will give me a little tailwind going forward, or it may not.  In any case, I think it's unlikely that buying at these levels will lead to future premium/discount-related regret.  (If I had bought GTU when the premium was 10% I would be very frustrated right now.)

I emailed the Central Gold Trust about this issue last week.  No reply, which is a little irritating.

Still, I believe the stuff about the fund not leasing out its gold, etc, and think that it's probably safer than GLD, so it's worth the premium to me.

Adam1226 wrote: Still, I believe the stuff about the fund not leasing out its gold, etc, and think that it's probably safer than GLD, so it's worth the premium to me.

You mean the discount? 

It's selling for 3.9% below NAV right now.

Pretty cool.

MT, why are you moving out of IAU and into GTU?

Wonk wrote: MT, why are you moving out of IAU and into GTU?

If I can buy a theoretically safer form of paper gold at a discount, why not?

Yeah, it seems like a sure thing, but the risky thing is that when arbitrage opportunities occur like this, it might also mean the fund managers are incompetent, and are about to be taken to the cleaners by all the smart arbitrage players in the market.

If they had a huge inflow of capital to the fund and had to buy at spot price to cover it, how would they come up with the difference?

GTU is now trading live at a premium....

https://spreadsheets.google.com/spreads ... y=CNzzi40L

Those opportunities close up quickly.

Storm wrote: Yeah, it seems like a sure thing, but the risky thing is that when arbitrage opportunities occur like this, it might also mean the fund managers are incompetent, and are about to be taken to the cleaners by all the smart arbitrage players in the market.

i'd like to hear more thoughts on this...i don't know enough to speak with authority. i seem to recall reading some articles suggesting that "true arbitrage" is not really possible with a closed-end fund.

If they had a huge inflow of capital to the fund and had to buy at spot price to cover it, how would they come up with the difference?

i suspect the 2 ways to get into the closed-end fund are: (1) buy shares on open market & (2) bring the fund sufficient gold & they will give you shares in exchanges (or some variation of that)

if so, the risk should be very limited? no?

Thanks, MedTex for the heads-up on GTU.

I was able to liquidate some GLD during it's $1500/ounce high, purchase GTU in my IRA at about a 2% discount, and I'll be picking up a nice shiney coin today from a local shop with the remaining funds.  Sure, there are some fees etc. involved, but I feel like I'm not really losing anything on the whole deal.

Have a great weekend gentlemen.

murphy_p_t wrote: i'd like to hear more thoughts on this...i don't know enough to speak with authority. i seem to recall reading some articles suggesting that "true arbitrage" is not really possible with a closed-end fund.

I emailed them to try to figure out why this happens, but still have not received a response.  

I have a theory that when gold rises rapidly, it tends to cause a high premium.  When it falls rapidly, it tends to cause the fund to sell at a discount.  

Anecdotal only.

Gold is very volatile it has big swings both up and down. A closed end fund like GTU does not buy or sell gold on a regular basis. Share holders buy and sell their shares on the open market. I believe that the premium or discount is determined by market sentiment. If the holders of GTU do not want to sell the premium rises. Last week there was a 3% premium this week it went the other way. Next week maybe another story. I look at it like this: It is always better to buy at a discount and sell at a premium but this is also risky because I can not predict what is going to happen. Now with the PP lets say your initial 25% gold is becoming a larger part of your portfolio you can start to watch the premium when it becomes 30% if you want the best selling opportunity. The rebalance bands are not set in stone
I am sure that anywhere between 30% and 35% there will be opportunities to sell. I do not see why a PP holder would be in a position to have to sell GTU at a discount. For the taxable investor GTU has advantages.

steve wrote:For the taxable investor GTU has advantages.

Yes, as long as that investor understands the risks of possible penalties and understands Form 8621 enough to fill it out themselves each year.

Gumby wrote:

steve wrote:For the taxable investor GTU has advantages.

Yes, as long as that investor understands the risks of possible penalties and understands Form 8621 enough to fill it out themselves each year.

I agree

I think we should also consider when you will draw down on your permanent portfolio. In retirement, when you are no longer accumulating, it is possible that you will be rebalancing from all asset classes to cash at a point when gold is out of favor, and potentially selling to others when it is at a discount in GTU. The tax advantage, and the potential to buy at discount as some here have succeeded at, is tempered by the added complexity of dealing with this closed ended fund.

6 Iron wrote: I think we should also consider when you will draw down on your permanent portfolio. In retirement, when you are no longer accumulating, it is possible that you will be rebalancing from all asset classes to cash at a point when gold is out of favor, and potentially selling to others when it is at a discount in GTU. The tax advantage, and the potential to buy at discount as some here have succeeded at, is tempered by the added complexity of dealing with this closed ended fund.

Every investor has to decide what they think is best. I like holding both real Gold bullion and GTU. For me there is nothing complex about GTU, It is easy to buy and sell, the annual  paper work for the FORM 8621 and required ATTACHMENT TO FORM 8621 and PFIC ANNUAL INFORMATION STATEMENT is not complicated at all. It can all be done in less then 5 minutes. When an individual buys Gold bullion there is almost always a premium. The premium is rarely recoverd on sale, the spread is how dealers make their money.
If anyone knows  a better way I am interested.