Sprott Physical Gold and Silver Trust (CEF)CEF

ETF Sprott Physical Gold and Silver Trust (CEF): An Overview

Profile: CEF is an exchange-traded fund (ETF) designed to provide investors with exposure to physical gold and silver bullion. It achieves this by holding gold and silver bars allocated and stored by the custodian, The Bank of Nova Scotia. CEF has a passive management style, meaning it tracks the performance of its underlying assets rather than actively selecting them.

Objective: The primary objective of CEF is to track the price of gold and silver bullion, net of expenses. This means it aims to deliver returns closely mirroring the performance of the physical metals.

Issuer: CEF is issued and managed by Sprott Asset Management LP, a subsidiary of Sprott Inc. As of December 31, 2022, Sprott has $19.3 billion in assets under management (AUM), and currently manages 49 ETFs.

Reputation and Reliability: Sprott has a strong reputation in the financial industry, having been founded in 1981 and listed on the Toronto Stock Exchange (TSX) since 1988. With its long history and substantial AUM, Sprott is considered a reliable issuer in the ETF market.

Management: The CEF management team comprises experienced professionals with expertise in precious metals, commodities, and asset management. John Ciampaglia, President and CEO of Sprott Asset Management, has over 30 years of experience in the industry.

Market Share: CEF is one of the leading gold and silver ETFs in Canada, with a market share of roughly 10.4% as of December 2022.

Total Net Assets: CEF has a total net asset value of approximately $1.85 billion as of October 26, 2023.

Moat:

• Direct Ownership: CEF offers investors direct ownership of physical gold and silver, unlike gold and silver ETFs that track futures contracts or use swaps.
• Strong Brand Recognition: Sprott's established name in the precious metals market provides CEF with brand recognition and attracts investors seeking exposure to gold and silver.
• Experienced Management: The team's expertise in managing gold and silver investments contributes to the ETF's track record and performance.

Financial Performance: CEF has historically tracked the price of gold and silver closely, net of expenses. Its performance varies depending on the performance of the underlying metals. Comparing CEF's performance to its benchmark, which is typically the gold or silver spot price, shows high correlation with minimal tracking error.

Growth Trajectory: The demand for gold and silver as safe-haven assets, inflation hedges, and portfolio diversification tools drives the continuous growth of the precious metals market. This trend is expected to benefit CEF's growth trajectory.

Liquidity:

• Average Trading Volume: CEF has an average daily trading volume of approximately 1.4 million shares, indicating good liquidity and ease of buying and selling.
• Bid-Ask Spread: The typical bid-ask spread for CEF is around 0.02%, reflecting low transaction costs.

Market Dynamics:

• Economic Indicators: CEF's performance is influenced by economic factors like inflation, interest rates, and global economic uncertainty.
• Precious Metals Market: The overall outlook for the gold and silver market affects CEF's performance.
• Supply and Demand: Fluctuations in gold and silver supply and demand impact the price of the metals and thus CEF's performance.

Competitors: CEF's main competitors in the gold and silver ETF space include:

• iShares Gold Trust (IAU): Market share - 22.5%
• SPDR Gold Shares (GLD): Market share - 32.5%
• VanEck Merk Gold Trust (OUNZ): Market share - 10.2%

Expense Ratio: CEF has an expense ratio of 0.40%, which is considered average compared to other precious metals ETFs.

Investment Approach and Strategy:

• Strategy: CEF passively tracks the price of physical gold and silver bullion.
• Composition: The ETF holds only physical gold and silver bars, with approximately 60% gold and 40% silver.

Key Points:

• Provides direct exposure to physical gold and silver.
• Strong brand recognition and experienced management.
• High liquidity and low transaction costs.
• Tracks the price of gold and silver closely with minimal tracking error.

Risks:

• Volatility: Gold and silver prices can be volatile, leading to fluctuations in CEF's value.
• Market Risk: The overall performance of the precious metals market can impact CEF's return.
• Counterparty Risk: The risk of the custodian failing to deliver the physical gold and silver.

Who Should Consider Investing:

• Investors seeking exposure to precious metals as a hedge against inflation.
• Investors who want to diversify their portfolio with alternative assets.
• Investors looking for capital appreciation over the long term.

Fundamental Rating Based on AI: 8/10

CEF possesses solid fundamentals supported by its strong brand, experienced management, and direct ownership of physical assets. Additionally, its low expense ratio and high liquidity make it an attractive option for investors. However, its performance depends heavily on the volatile price movements of gold and silver, making it a suitable investment for those with a higher risk tolerance.

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.

Resources:

• Sprott Physical Gold and Silver Trust website: https://www.sprott.com/investment-strategies/physical-bullion-trusts/cef/
• Sprott Asset Management website: https://www.sprott.com/
• YCharts: https://ycharts.com/indicators/sprott_physical_gold_and_silver_trust_cef_aum
• Globe and Mail: https://www.theglobeandmail.com/investing/article-best-etfs-for-betting-on-gold-prices-as-experts-see-commodity-as/
• Zacks: https://www.zacks.com/funds/etf/cef/performance
• MarketWatch: https://www.marketwatch.com/investing/etf/cef/profile