# CEF.TO vs. CGL.C.TO vs. MNT.TO



## mikeyrofl (Jul 12, 2016)

Of these 3 ETFs, which would you recommend for long-term holding?


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## MarcoE (May 3, 2018)

Personally I have a little cgl.c, but I'd be interested to hear other people's opinions.


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## Speculator (May 9, 2018)

MarcoE said:


> Personally I have a little cgl.c, but I'd be interested to hear other people's opinions.


I don't ever sector invest but if one owns a broad based Canadian ETF like XIC or ZCN or VCN then you have enough exposure to gold companies. The added high MER to own these is enough of a turn off for me.


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## james4beach (Nov 15, 2012)

Here are my thoughts on this.

CEF -- this was wrecked by Sprott, who did a hostile takeover of the fund, so it's a whole different beast now than it was since 1960 (previously it was the oldest and best established bullion fund in the world). It's got new management and Sprott has not yet demonstrated a history with it. I used to hold this, but I sold all my units after the Sprott acquisition.

CGL.C -- good in theory, but hasn't done well in practice. It is very thinly traded, so you will not get good fills on trades. It also has a high management fee and has shown poor tracking vs gold bullion. 5 year performance of 2.73% per year.

MNT -- probably the best of them. Has better trading volumes and good track record, tracks gold well. 5 year performance of 3.06% per year which is higher than CGL.C due to lower expenses and better gold tracking. That +0.33% per year is significant.


In my opinion, the best CAD-traded gold bullion fund is MNT. Really other than that, I think the other alternative is to use one of the huge American ones (IAU or GLD). Personally I hold large amounts of both MNT and IAU in the US.


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## james4beach (Nov 15, 2012)

Speculator said:


> I don't ever sector invest but if one owns a broad based Canadian ETF like XIC or ZCN or VCN then you have enough exposure to gold companies. The added high MER to own these is enough of a turn off for me.


The funds mentioned by the original poster are not gold companies (miners), they are bullion funds that track the price of the gold commodity. They are attractive because they are uncorrelated with stocks and provide protection in case of currency failure. The low correlation with stocks and bonds is quite interesting because it means that if you combine stocks+bonds+gold in a portfolio, the overall portfolio has reasonably high returns but with less volatility, smoother year-to-year behaviour.


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## MarcoE (May 3, 2018)

Ray Dalio recommends that portfolios have between 5% - 10% in gold. He calls gold "my cash," and he uses it as a hedge. Dalio worries about economic, social, and political upheavals ahead, and believes gold can be stable through rough waters. His All Weather portfolio is 7.5% gold.

But other investors, such as Buffet, hate gold and think it's useless in a portfolio. I believe that Ben Stein (if you care what he says) has called gold one of the worst places to put your money.

My own portfolio is only about 1.5% gold, all of that in CGL.C. Though I'm tempted to increase that amount, to bring it a bit closer to Dalio levels.


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## james4beach (Nov 15, 2012)

I think anyone who looks at portfolio design and the math of asset allocation mixes will quickly see the benefit of adding gold. Ben Stein is a joke, a total shill. But frankly I enjoy seeing how unpopular gold is. I would be uncomfortable if everyone was adding it to a portfolio.

MarcoE, you might want to play with this back test tool and play with different allocations. Observe the result, for example CAGR (rate of return), maximum drawdown, worst year
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

You'll probably have to increase your gold weight to at least 10% to start seeing the benefit for the overall portfolio. Just play around with the visualizer and see what results you get. Note, however, that *rebalancing* is a key element of this. Because gold is uncorrelated with stocks, you want to ride the beneficial effect of stocks, bonds and gold *doing well at different times*. This is a subtle detail but it's at the heart of the benefit. For example after a year stocks do really well, you rebalance (sell some stock) and buy more gold.

The raw performance of gold (annual return) is what people usually fixate on, but this is not the characteristic that creates the magic. I'm happy if Ben Stein focuses on that, though. The same point applies to the stock/bond mix such as 50/50. Mixing bonds with stocks creates the same beautiful effect, even if bonds themselves perform poorly. Anyway, play with the visualizer and you'll see what I mean.

Example: 34% US Stock Market, 33% 10-year Treasury bond, 33% Gold, with annual rebalancing.

```
CAGR: 9.53%
Worst year: -10.28%
Max drawdown: -20.08%
```


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## MarcoE (May 3, 2018)

james4beach said:


> You'll probably have to increase your gold weight to at least 10% to start seeing the benefit for the overall portfolio.


I'm still pretty new to gold. I only started buying the stuff a few months ago, which is why I'm only at 1.5%, but I do want to increase that. Any thoughts on timing the purchase of gold? Is now a good time to go all in? Or maybe dollar cost averaging over the next couple of years would be wiser?

Also, do you think keeping all my gold in CGL.C is a decent idea, or do you recommend buying actual coins too?


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## gardner (Feb 13, 2014)

CEF is a mix of gold and silver, whereas the others are gold only. CEF trades on NY in U$ as well as on the TSX (CEF-U.TO) in U$ and (CEF.TO) C$.
MNT only trades on the TSX, though in both currencies.

Although a CEF holder, I agree with J4B that MNT would be preferred these days.


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## Argonaut (Dec 7, 2010)

Gold funds on the TSX are a bit of a mess. GLD is the king of liquidity and track record, and it has the best ticker symbol. A lot of people will have USD for other reasons, so it's no problem to buy GLD.


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## fatcat (Nov 11, 2009)

i am buying more physical ... even if you take this article with a grain of sale (the ceo of goldcorp says that we have reached peak gold ... but of course why wouldn't he say that ?) i think gold has a permanent floor of 1200 USD and we aren't far away from that

i worry a little about crypto affecting the gold price, i think it will have a very real effect on gold going forward but i still like gold

http://business.financialpost.com/c...ve-been-discovered-declares-goldcorp-chairman

when i hold in an etf i prefer MNT, easy to get in and out of both USD and CAD and if the world went to hell i would trust the RCM to give me my money though i wouldn't hold my breath

to me more than 5-7% is a waste of money ... gold costs money to own and doesn't earn a penny as we have seen for the last few years

i get james's theory but i think that the conditions that would make gold work as alternative asset may not come along for years/decades and in the meantime you are bleeding money


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## Speculator (May 9, 2018)

I don't own any gold at present (have in the past) and probably never will again. When I did I always preferred the gold companies. They have the ability to sell reserves when the commodity rises and to hold production when the price declines. Inevitably this is what moves prices. Problem as I see it today is most can't figure out how to make money no matter what the gold price. When you just hold the bullion your just stuck. My opinion.


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## james4beach (Nov 15, 2012)

fatcat said:


> to me more than 5-7% is a waste of money ... gold costs money to own and doesn't earn a penny as we have seen for the last few years
> 
> i get james's theory but i think that the conditions that would make gold work as alternative asset may not come along for years/decades and in the meantime you are bleeding money


I can show you it's not theoretical. It's already been happening; those conditions are in play right now. Adding gold is already helping portfolios.

I did the following calculations for a stock & bond portfolio based on equal weight Canada/US indexes, XBB for bonds, and MNT for gold. These numbers include all ETF fees, and for the years MNT didn't exist, I took the raw gold performance and gave it a hefty 0.60% fee (pessimistic). I am also starting at 2007 to again handicap gold, since gold went up massively in 2005 & 2006.

Time period is 2007-2017. First, here's a 50/50 stock and bond allocation:
annual return = 6.06%
volatility, std dev = 6.7%

And now adding in 10% gold, for a 45/45/10 allocation:
annual return = 6.28%
volatility, std dev = 5.3%

How about 33% gold, for a 34/33/33 allocation:
annual return = 6.67%
volatility, std dev = 3.8%

So yes, gold costs money to own, but the benefit of the asset class is not decades away. Adding 10% gold into the portfolio has increased the return while reducing volatility. Adding even gold improves the portfolio even more.

Just look at that difference between 50/50 (traditional conservative portfolio) and 34/33/33 (33% gold). How is that not attractive?


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## MarcoE (May 3, 2018)

Any thoughts on owning gold bullion vs. gold ETFs such as CGL.C?


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## gardner (Feb 13, 2014)

ETFs are highly liquid with an organized market, no trading risk and low well arbitraged buy-sell spreads. Physical metal is risky to store since someone could steal it off you, risky to buy and sell with fake bars around. Has significant buy-sell spreads and bars are comparatively high value compared to units of an ETF. If you are holding gold as a hedge against the zombie apocalypse, only physical metal will do, I suppose. But in that instance you probably wanted AKs and 223 ammo. For normal purposes, I would go with the ETF.


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## james4beach (Nov 15, 2012)

Both are pretty cheap to buy, and physical can be stored cheaply as well. For example you can easily put $20,000 worth into a safe deposit box that costs $50/year (which is 0.25% expense ratio). As for the risks, I think both have some significant risks and it's probably a question of which you're more comfortable taking on. The gold ETFs certainly raise plenty of questions with the middle men. On the other hand, the risks with physical gold are pretty serious. Ever tried transporting a few ounces of gold through an airport? I have ... want to guess what happens at the x-ray security? If I ever want to move my physical gold long distances, I'll need to do this by car, and will hope my car doesn't get stolen en route.

Physical gold: can have some fakes, can be stolen, can be lost (e.g. death), must be transported physically, can be damaged and reduce trading value

Gold ETF: also vulnerable to fakes, can be stolen via middle men, pricing rests on properly functioning arbitrage, and vulnerable to problems with middle men and custodians


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## MarcoE (May 3, 2018)

Sounds like CGL.C is right for me. I currently have 2% of my portfolio in gold, and can see the merits of bringing that up to 5%-10%. My portfolio is already equity-heavy, and gold's price has gone down a little in recent days, so I think this is a good time to build up that gold portion.


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## james4beach (Nov 15, 2012)

Both MNT and CGL.C continue to do a good job tracking pure bullion. I still prefer MNT for its lower fee and better liquidity, but CGL.C fund size has grown a bit so it's becoming more promising. Quick comparison:

*MNT* : 0.35% MER, gold bars stored at Royal Canadian Mint vaults. Net assets $425 million. Intermediaries (trust) is with Mint directly.

*CGL.C* : 0.56% MER, gold bars stored at Scotia vaults in Toronto. Net assets $100 million. Intermediaries (trust) is Blackrock & Scotia.

Gold has been very weak this year, so if you've been considering adding this asset class to your portfolio for diversification, this could be a good time. I'm already at my asset allocation target, split between MNT (CAD), IAU (USD), and physical.


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## hfp75 (Mar 15, 2018)

With Markets being temperamental, I'm in a holding pattern right now. Later this year - if/when markets stabilize a bit, I'll be adding another 3% to my MNT. This will bring me to 7% this year. Next year (spring) I'll be adding another 3% and I'll be sitting at 10%. This is a comfort point and part of my plan..... 

I wouldn't even mind working towards 15%. I think markets should hold until Canada Day next year. We will see if I am correct or not..... I think we are too early for the interest rate/bond market to actually trigger a recession/correction/bear market. 

I dont deny that the economy is a stick man and once the crutches are pulled out hes gonna topple over....


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## james4beach (Nov 15, 2012)

I've actually lightened up on my gold exposure over the last few months, mainly because I decided on a new asset allocation with 20% gold bullion last year, so I've been working my way down to the target.

The two main Canadian bullion ETFs (MNT and CGL.C) both have wide bid/ask spreads so you have to be a bit careful when placing orders. It's helpful to trade on a day where the market is moving in your favour. For example when I was selling MNT, it was better to do this on days that gold is strong. If I was buying more, I'd do it on a day gold is weak.

I was able to get my trades filled within 0.2% of NAV which is awfully good, but I've seen the trade price go as far as 1.0% away from NAV. This should theoretically get better as more people trade these.


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## james4beach (Nov 15, 2012)

This might be of interest to @librahall @MarcoE @hfp75 or others holding CGL.C

There were recently some changes to the CGL and CGL.C funds, which were voted in by shareholders.

The gold was previously held at Scotia, with sub custodians The Brinks Company and Via Mat International. But Scotia is exiting the bullion custodian business in 2021.

This press release describes the major changes. The gold will either be stored at the Royal Canadian Mint or at International Depository Services of Canada. The current list of gold bars (found on the ETF page) *shows that the bars are all at the Mint*, which is fine with me.

BlackRock Canada has appointed CIBC Mellon Trust Company (“CIBC Mellon”) to act as bullion custodian for the iShares Funds and State Street Trust Company Canada (“SSTCC”) as custodian of the non-bullion assets of the iShares Funds. It is expected that the bullion owned by the iShares Funds will be stored in the vault facilities of The Royal Canadian Mint (the “RCM”) as CIBC Mellon’s sub-custodian and/or International Depository Services of Canada Inc., as the RCM’s sub-custodian. The Bank of Nova Scotia, the current custodian of the iShares Funds, will cease to be a custodian of the iShares Funds following the full transition of custody responsibilities to CIBC Mellon and SSTCC, respectively.


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## librahall (Apr 11, 2020)

james4beach said:


> This might be of interest to @librahall @MarcoE @hfp75 or others holding CGL.C
> 
> There were recently some changes to the CGL and CGL.C funds, which were voted in by shareholders.
> 
> ...


Thanks. Good to know. I sold some MNT when it had 3% premium and converted them into CGL.C a few months ago.


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## hfp75 (Mar 15, 2018)

When MNT is at a 3-5% discount you should swap back.....


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## fireseeker (Jul 24, 2017)

hfp75 said:


> When MNT is at a 3-5% discount you should swap back.....


It is now.


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## james4beach (Nov 15, 2012)

fireseeker said:


> It is now.


Yeah, quite a discount. And it could stay like that for years. There's no rule saying a discount has to disappear quickly.


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