Central Fund of Canada (CEF.A)

[Dopplegangerr]

Do you think this is the best way to get exposure to both gold and silver? I own G.TO now and was looking to pick up PAA.TO, but this also looks interesting

[Dopplegangerr]

Zylon, I just reread your little blurb and the end of your last post and I think that already answered my question lol, sorry

[zylon]

The premium has nearly been wrung out of CEF
I'll be looking to buy within the next week or two if price continues to decline.



http://www.cefconnect.com/(X(1)S(m0b...ookieSupport=1

[james4beach]

I've held CEF.A since 2007. I think it's a great way to hold precious metals. There's some information in this report:
http://www.greatponzi.com/reports/20090829-CEF.html

Thinking off the top of my head, there's 3 main ways this differs from actually owning gold/silver:
1. CEF owns the metals through a bank, and you're a shareholder in the fund
2. The share price fluctuates around the NAV, so beware the premium/discount
3. The fund incurs expenses so some of your metal "leaks away" while you hold CEF

That report I linked goes into depth on #3. Basically you're losing 0.6% to 0.8% per year of metal content in your shares. If you think of it as an MER, that's pretty low. In fact the analysis was done a couple years ago. In the last couple years the "MER" has been even lower than that. Not a bad deal, I think.

[james4beach]

Here's a tip regarding the premium/discount to NAV. That figure (as they post on the web site) is slightly misleading as the share price closes at 4 pm eastern, whereas the metal prices are taken from the London fix which is a totally different time. If looking at the TSX shares, you also have to consider the USD/CAD rate, and theirs is taken at noon. So you can see these times do not perfectly align... that means the premium or discount is a bit artificial, though it's generally the right ballpark.

The only proper way to calculate the premium to NAV is to do it in real-time, during the trading day. This is pretty easy to do with a basic spreadsheet (just mimic what they've done on their NAV page).

Before trading CEF.A, I always pull up my own spreadsheet based on Central Fund's NAV page, and update it with the real-time information as the shares trade. Then I really know what the premium/discount is.