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Tuesday, December 08, 2009

Buy Gold at or Below Net Asset Value with This Closed-End Fund

It appears that the correction in gold will be extended a second day today. If this correction continues, I have found a closed-end gold bullion-backed ETF, with a visible net asset value, that you can purchase at, perhaps, a discount in the near future. The Central Gold Trust , which trades on the NYSE Euronext, closed Friday at a 5.7% premium to NAV.

The following description is from

“Central Gold-Trust, launched in Canada in April, 2003, is a passive, single purpose, self-governing closed-end trust, 98% invested in long-term holdings of gold bullion, substantially in physical international bars, and does not actively speculate with regard to short-term changes in gold prices.

Central Gold-Trust’s gold bullion is held unencumbered in allocated, segregated and insured safekeeping in Canada, in the treasury vaults of the Canadian Imperial Bank of Commerce. The gold bullion is physically audited by Ernst & Young in the presence of Gold-Trust Officers and Trustees as well as bank officials.

Central Gold-Trust Units now trade on both the AMEX with symbol GTU and the Toronto Stock Exchange (TSX) with symbols GTU.UN in Canadian dollars and GTU.U in United States dollars.”

The closing market price on Friday was $47.12 while the NAV was $44.58. That is a $2.54 premium to NAV. The trading range on Friday, December 4th was $48.74 to $46.47. During extreme moves closed-end funds can and do trade at discounts to NAV.

If the premium evaporates during this correction on any given trading day, buying gold bullion at a discount or even at NAV is considered a decent entry price for intermediate and long term investors.

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