6/24/2023 0 Comments Ampex coins![]() This discount helps compensate for the management fees paid by the trust. For example, 1 OZ American Eagle Gold Coins are typically around $1,975, so the actual discount in buying PHYS shares is closer to 6%. Retail investors acquiring physical gold coins typically pay a higher price. ![]() The closing price of PHYS was $14.81, approximately a 1.3% discount to the fund’s physical gold holding. That means each share of PHYS holds about $14.99 in gold. The current price of gold is $1,873 per ounce according to AMPEX. On a per ounce basis, PHYS is actually cheaper than buying physical gold. It turns out it’s cheaper to buy gold on Wall Street than at your local coin shop. Under normal circumstances, this won’t be an issue, but in the event of bankruptcy these ETFs would be unsecured creditors of the custodian bank There is still the risk of theft or fraud with PHYS, but there is one less layer of counterparty risk when compared to other physical gold funds that have unallocated accounts. This gold is stored at the Royal Canadian Mint In contrast, physical gold ETFs typically have unallocated accounts that give them a claim on a specific amount of gold held by a custodian bank, but without direct title. ![]() ![]() All the gold in PHYS’ portfolio consists of specific physical gold to which it has direct beneficial ownership. There is a subtle difference between PHYS and most physical gold ETFs. No matter how you store gold there will be costs. This is obviously higher than storing gold in our sock drawer, but when you factor in the cost of protection and security it seems reasonable. PHYS is a closed end fund that holds substantially all of its assets in physical gold. The Sprott Physical Gold Trust ( NYSEARCA: PHYS) is a simple way to get exposure to gold at a discount slight discount. Source: Sprott Sprott Physical Gold Trust This chart shows how gold compared to stocks and treasuries during the global financial crisis, the Covid-19 outbreak, and various disruptions in between: Gold’s value as a hedge against turmoil has held up in recent decades as well. During the tech bubble crash, when the S&P 500 fell by 49%(and the NASDAQ fell even more), gold rose by 12.4%. The 1970s gold bull market took off during a terrible decade for stocks. History also shows that gold usually does well during times of market turmoil. Given that US stocks are near all time highs in the middle of a pandemic and disputed election, it seems wise to prepare for a possible market shock. Although this trend reversed slightly, they continue to hold large gold reserves, indicating it should be taken seriously as a store of value and hedge against a major decline in the US dollar. Over the past 5 years, central banks around the world have slowly been building up their allocation to gold. Gold has a 5000+ year history as a store of value. In order to prepare for inflation, investors need to find reliable stores of value. Most investors are unprepared for the high probability of inflationary consequences fromthese policy changes. The problem is inflation can quickly become difficult to control once expectations become embedded in the economy like they did during the 1970s. Notably the Federal Reserve recently changed its inflation targeting framework to allow for overshooting of its inflation target. In the near future, central bank digital currencies are likely to further blur the lines between fiscal and monetary policies. Therefore, these policies will likely drive inflation in the real economy, not just financial assets. However, in 2020 policymakers have been increasingly creative in providing direct payments to households. In previous crises, government stimulus was primarily targeted at financial markets, not households. In the first 6 months of 2020, the Federal Reserve’s Balance sheet expanded by more than it did during the decade following the financial crisis. Governments around the world have responded to the Covid-19 pandemic with unprecedented fiscal stimulus. Second, gold tends to do best in times of turmoil. First of all there is increased risk of inflation and the general decline of the US dollar. The current macroeconomic environment makes gold a core portfolio holding for two reasons.
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