With India adding 200 tonnes of gold to their reserves, gold has hit an all-time high. It was highly anticipated that China was going to purchase this block of gold. With China publicly expressing its wish to increase its gold reserves over the coming years, one can only imagine that gold might appreciate significantly over time.
So what is the best way to play gold? You can buy gold producers but that takes on the risk of an individual companies performance. Some will outperform bullion while others won’t. For those that want exposure to bullion, consider the Claymore Gold Bullion Trust. The symbol is cgl.un on the TSX.
The units trade at a discount to its Net Asset Value (NAV). Today’s closing price was $10.00 and the NAV is roughly $10.40. Most Gold Trusts trade at premiums. Claymore will convert the units into an exchange traded fund if the units trade at a 2% or more discount to its NAV for 10 consecutive trading days starting at the end of November. Once this happens the discount should disappear.
If you buy gold outright as a retail investor, expect to pay a premium over what is quoted in the press. Couple that with any storage costs associated with buying bullion and you will see that Claymore’s product has merit. Another benefit for Canadian investors is that the units are hedged into Canadian dollars.
Typically, commodities move inversely with the US dollar. As gold goes up, the US dollar goes down potentially negating any upside to Canadian investors. In the interest of full disclosure, I do own some of the units personally.
Your thoughts about gold and where its heading are greatly appreciated.
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