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exception alert: CEF (central bank of canada) related

edited April 2011 in Fund Discussions
as of last night, this closed end fund lost all of its premium. for those considering purchase, this is one of rare opportunities. average premium has been in a 7-9% range for a while.


  • My call into CEF on the drop in its premium seemed to be related to an overall tighten of premium with all Closed End PM fund. In a downward price scenario I could image the premium going away first, then the share price being impacted, and then a negative premium forming. Does this make any sense? In other word, Could this be a sign of a market dynamic negatively impacting PM?

    They also mentioned that a public offering recently occurred which also could have impacted the premium (more shares available = lower premium). This would be a temporary situation existing until these extra shares are absorbed by the market.

    Any thoughts?

  • Not sure what happened, but if there was another offering of shares, that may have taken the premium down.
  • both are very valid comments bee. when the offering occured the premium dropped from 7-9% to 4-5% -- that's addresses your second point. i think the dynamic you're describing in a falling market works for all CEFs, not just PM related. The most popular class will most often aquire premium which could last from several days to several years. My point was to bring to the board attention the holding that had been often discussed (i know BobC and rono are fans) and may be on someone's buy list -- as having reached decent value for the first time in at least a year.
  • Hi Scott/Bee,

    I'm not sure I'd read anything negative into this movement, but who knows. Keep in mind, however, that we've already entered the 'off season' for gold and it is normally downish until fall.

    That's actually one of the most bullish telltales about this recent rally - that it was in spite of the seasonality.

    And just for the record, I'd love to see a pullback of sorts so that I can buy some more stuff at sale prices. Where the bargains are appearing is with the better bullion coins - not the Best, but the Better grade.

    One example is Morgan silver dollars and another is evern silver eagles. The differential between the 1996 and the pack is now very slim. I recall regular ASE's being $20 and '96's being $60. Now they're 45 and still 60.


  • I agree with rono in terms of the seasonality part. Gold is often lower during the late spring and summer months, since most of the world "gift-giving" holidays are over. Now might be a time to consider some dollar cost buying to begin accumulating shares, for those who do not already own CEF or whatever their favorite bullion offering might be. As another poster pointed out, we use CEF as our main gold holding in client accounts. Some clients have bought individual gold coins and bars, but we only facilitate those transactions.
  • How does $US weakness/$CAN strength effect US shareholders of this fund? Thanks.
  • Hi PopTart,

    It's hard to say and frankly, it so 'on the margin' that I'm not sure it's worth worrying about. The issue is that anyone holding this fund in a taxable account needs to check out their website for the following disclaimer. Note that this fund is still the best way to own bullion in a taxable account. The bullion ETF's for sure a 28% hit.

    Here's their statement about US taxes:

    Here's some additional writing about taxes stateside. Frankly, however, if you're using TurboTax, you shouldn't have a problem.


  • Hi Rono,

    Thanks again for your help : )
  • Oops, left off the additional stuff about taxes. Lo siento.

  • Thanks Rono.
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