Physical redemptions from Sprott precious metal funds

Kid Dynamite drew my attention to some redemptions from Sprott precious metal funds. Below is a table showing the redemptions in ounces since the beginning of this year (PSLV had has no redemptions).

We know these are redemptions because the prospectus says that redemption notices will be processed on the last day of the month (as long as received before the 15th of a month) and thus show up on the first day of the next month.

The question is why are people redeeming. If you look at the historical premium/discount to NAV for PHYS, PSLV or SPPP you will see that PHYS and SPPP have been trading at a discount to NAV of up to 1% and 1.5%, respectively. So if you are a largish holder who can take 400oz bars, why sell your shares at a discount when you can get the physical for 100% of NAV with fees of $5 a bar and $5 per ounce delivery (if you can't arrange your own, which you'd want to because $5 an ounce is nuts for any decent amount) or zero delivery cost if you have an account with the Canadian Mint. Note that PSLV has had very little time trading at a discount to NAV so we don't see any redemptions for it as you can sell on market at a fair price.

My guess is these are most likely physical redemptions as cash redemptions are done at a 5% discount to NAV (or a volume-weighted average price) so it makes no sense to redeem for cash and lose 5% when you can sell on market and only lose 1%.

So the Sprott funds are presenting a nice little arbitrage where you can buy gold at a discount. It is a bit hard to say if it is arbitrage or just a holder(s) from long ago getting out. As long as it continues to trade at a discount we should continue to see these redemptions. The discount is persisting I think because to-date only 2.4% of PHYS has been redeemed, which is probably not enough to move the price.

With all these claims that the bullion banks are out of physical reserves and about to blow up, it is unusual why we aren't seeing much more redemptions out of PHYS, especially since the bullion banks could do it at a discount, effectively getting paid to take PHYS' physical.

Maybe they don't believe PHYS has the metal - that is a joke by the way, which will only make sense to those who remember all the spin about how the PHYS and PSLV premium was an indication that people trusted the Sprott funds more because they were backed by real metal, as in logically then, those people should believe the fact the funds are trading at a discount means people must now not trust the Sprott funds. Lesson: don't ever pay a premium for a closed end fund, no matter how good the story.

Maybe the other reason is that the bullion banks aren't actually that desperate. There is nothing stopping them from coatchecking (comment dated Nov 6 7:00PM)out of PHYS, although I'm not sure what the borrow situation on PHYS has been like. And if  the bullion banks have "hit the bid" to loosen up metal from GLD, well the same effect happens to PHYS, so why would a bullion bank not step in and buy up PHYS shares being sold by weak hands to get hold of its physical?

Anyway, just some opinions/thoughts at this time (not facts) and something to watch.