Canadian mint’s gold and silver funds trade at a discount to metal valueon May 30, 2013 at 11:00
On Sale Now: Canada’s Gold Reserves
By Martin Mittelstaedt
The Globe and Mail, Toronto
Wednesday, Could 29, 2013
There’s gold and silver on sale on the Toronto stock industry, courtesy of an uncommon source: the government of Canada.
The Royal Canadian Mint has issued two exchange-traded receipts, one particular representing a weight of gold, the other a weight of silver, that are currently trading for less than the industry worth of the precious metals they represent.
The discount is modest. For the gold ETR, it was 1.7 per cent on Wednesday for the silver receipt, slightly much less than 1 per cent.
Nevertheless, it is uncommon to locate securities exchangeable for precious metals worth significantly less than their existing metal costs, particularly when the securities are backed by the mint, which is backed by the full faith and credit of the triple-A-rated federal government.
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“We’re trading at a bit of a discount. We are not specifically confident why,” comments Steve Higgins, senior manager of investor relations at the mint.
He has been shocked that the securities have been trading so cheaply compared with their metal value, particularly considering that the mint’s telephones “type of went nuts” this year with institutions clamouring to meet investor demand to acquire coins and bullion. Demand for gold coins in the very first four months soared 123 per cent from the very same period in 2012 for silver coins, it is up 88 per cent.
The discount is specifically unusual contemplating investors holding enough of the receipts can take them to the mint and redeem them for gold coins or bars held in the Crown corporation’s fortress-like vault near the Parliament buildings. Ever beneficial in this department, the mint publishes a list of armoured auto businesses that can be dispatched to haul away the lucre. To date, although, only two giant 400-ounce gold bars worth about $ 560,000 (U.S.) each and every have been picked up.
“We never like people pulling up with their pickup trucks or something along these lines” for safety factors, Mr. Higgins explains.
The discount has arisen as investors dumped the securities following the swoon in valuable metals prices in February and April, and is a sign of how disenchanted markets are toward the one-time havens. Both securities previously traded for far more than their metal worth. The gold receipt, which trades under the ticker symbol MNT and was issued in 2011, once had as a lot as a 10-per-cent “premium,” or excess value over the underlying metal value. The silver receipt trades beneath the symbol MNS.
A lot of investors may be unaware of the two receipts, which combined represent only about $ 550-million worth of precious metals. That tends to make them modest fry compared to the giant SPDR Gold Trust, the world’s largest gold fund, which holds a stash of worth about $ 45-billion.
To be positive, the mint’s securities are slightly different animals than the SPDR, which represents an interest in a fund that holds gold bullion. In the case of the mint’s receipts, investors have a direct interest in actual metal held in safekeeping by the mint.
The SPDR tracks its actual gold value simply because the fund redeems and creates securities, as required, on a day-to-day basis to meet demand. For the mint’s receipts, there are a fixed number of securities outstanding their value can depart from the worth of the metal they represent primarily based on the rise and fall of investor demand.
The federal government could purchase the receipts and pocket the discount itself, but does not intend to do so. Main investors holding at least ten,000 of the gold ETRs or 5,000 of the silver ones could also redeem them for metal and obtain holdings at a under-industry cost.
Chris Carkner, mint sales director, said demand for gold and silver coins started increasing sharply just right after the U.S. election, and received another boost this year when valuable metal rates sagged in February and April. Sales have been up around the planet, such as in the U.S., Singapore, Hong Kong, and Germany, exactly where silver coins are well-liked. In the initial four months of the year, the mint sold 440,000 ounces worth of gold coins and nine million ounces of silver coins.
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