The premiums on PHYS and PSLV are back more to 'normal' levels now, although still hardly exuberant. PSLV is at a slight premium, and PHYS is almost flat.
The deeper discounts on CEF and GTU are still there, but a bit thinner that they have been.
Since
the last time I put out this chart, another 91,680 ounces of gold bullion have been redeemed from the Sprott Physical Gold Trust.
I can imagine someone rationalizing this redemption as an arbitrage deal because PHYS is selling at a slight discount to its NAV. However, given the 'friction' of the transaction, and the necessity of storing this amount of gold, it seems like a fairly small amount to be tempting for a mere arbitrage.
Although it is possible that PHYS has priced its redemption process too cheaply. And there is no allowing for the desperation of a hedge fund that is willing to scrape for thin returns.
But one would think that playing the spread with paper and leverage, and betting that there would be a reversion to norms if the premiums fall to historically low discounts, would be a smoother and more scalable wager for any fund truly interested in paper profits.
But this seems to be viewing a phenomenon in isolation that I think it is more correctly seen as part of a general trend, that one is foolish to ignore.
As I have shown here repeatedly, there is
a general scouring of enormous proportions of the physical gold bullion from most if not all of the Western trusts and funds at these prices as set by the Comex, which unfortunately is still a price maker for the physical trade despite its own shrinking physical basis. That is the inconvenient reality that gold imposes on the financiers: they cannot print it into existence, except as an apparition of paper, without genuine substance.
And there are none so blind as those whose paychecks depend on their willing ignorance. It is unfortunate, but a fact of life.
So, let's see where this grand experiment goes. I have not been keeping an eye on the short interest in the PHYS, but I think the greater problem is the price of gold overall, which does not seem to be a market clearing price in terms of the actual commodity. And as a result, the physical bullion is flowing towards markets paying fairer prices, and finding ownership in stronger hands.
But why argue about it? Let the tide go out, and we will see what allocated and unallocated funds are naked. And who, at the end of the day, is actually holding what gold, and with what encumbrances, cross claims, and counterparty risks.
