Sunday, January 8, 2012

Purchasing Precious Metals: NAV Considerations

I am not a financial advisor.  I would recommend speaking with one before making any financial decisions.

I want to take a moment to discuss the NAV for precious metals funds.  NAV means Net Asset Value of the fund.  In simple terms it means the premium you pay for the value of the physical metals stored at the fund.

For example, this past week the PSLV, Sprott's Physical Silver Trust that buys and stores only physical silver, crossed a 32% NAV to reach a new record.

This means that investors are paying 32% over the spot price of silver to invest in the fund.  When the fund launched at the end of 2010, I decided to put my 401K funds that were invested in SLV into the PSLV.  At the time the NAV was only 4%.  I was very fortunate to enter at the beginning.

I always recommend that new investors establish their initial core position in physical metal through either coins they keep on hand or coins held through a company such as goldmoney.  After that position is established they may want to use some of their money in their 401k to invest into a fund, and I am usually asked where I would recommend they invest.  If you are looking for a gold only fund the premium on the Sprott Physical Gold Trust (PHYS) is still low(currently only 6.4%). 

But what about silver?  With the premium now above 32% it is a more difficult decision. I would still not recommend using the SLV, as there have been countless allegations that the fund does not hold all the physcial metal it claims to back the price and is just another "paper" promise.  I use the SLV fund strictly as a very short term trading tool.

There is another option in the Central Fund Of Canada; symbol (CEF).  This is a fund, similar to Sprott, that buys and stores physical precious metals.  It keeps 55% of its holdings in gold and 45% in silver.  While this fund does not offer the 100% silver exposure of the PSLV, its premium is currently less than 1% making it a less expensive purchase.

So in review, I would begin your accumulation by purchasing physical precious metals you can either keep at home, in a deposit box, or with a company like goldmoney.  Then you can begin accumulating through a company such as the Central Fund of Canada or a Physical Sprott Fund.  When a strong physical position has been established you can then branch out into the more speculative areas of the precious metals sector: gold mining stocks.  I would absolutely recommend purchasing a professional resource that dedicates themselves to researching the best available stocks.  My two personal favorites are:

Gold Mining Stocks: The Gold Stock Analyst

Silver Mining Stocks: The Morgan Report

If you would like a professionally managed gold stock mutual fund, I would recommend the Tocqueville Fund managed by John Hathaway, which focuses on gold mining stocks.  The symbol is (TGLDX).

To open an account with Goldmoney allowing you to begin storing physical precious metals easily and electronically, click here:

GoldMoney. The best way to buy gold & silver

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