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I actually like the mnt premium. Yes you need to be aware of it, but it works more like real gold. Call a RCM dealer and ask what a gold maple is selling for, then subtract the spot price.... there is the same premium on physical that there is with mnt. Probably cause there is a process in place to convert your mnt into physical via the RCM and that option as far as I know doesn’t exist with other gold ETF’s.
 

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I actually like the mnt premium. Yes you need to be aware of it, but it works more like real gold. Call a RCM dealer and ask what a gold maple is selling for, then subtract the spot price.... there is the same premium on physical that there is with mnt. Probably cause there is a process in place to convert your mnt into physical via the RCM and that option as far as I know doesn’t exist with other gold ETF’s.
Except it doesn't always work like that. I've also seen MNT go as far as 1.5% discount to NAV. It's not a steady premium.

According to the records I've kept, this large MNT premium only appeared when the shutdown started. One possible explanation is that the mechanism of redeeming MNT for physical gold (normally available) may be offline due to the shutdown. So perhaps the premium is there because large unit holders aren't able to redeem units.
 

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Possible, but I bet most people buying MNT are not planning to redeem for physical. I would bet that most people that are buying it, like the fact that it is a Crown Corp and thus your purchase is backed by the RCM / the Queen. The fund also does not expand and contract to suit market demand. So, there are a few factors at play, there is true supply / demand behind the price which is supportive of real market value. You could say that the MNT premium might actually be a local/Canadian version of the GVZ (Gold Volatility Index) its just that there is no daily graph available to show the premium/discount. Also, if just say MNTs price is accurate, it could highlight a flaw in what might be considered a manipulated gold price, so maybe what we consider golds price, is being manipulated artificially down. I also think its a scam that when gold ETFs need more gold, so they can sell more shares, it just seems to happen overnight, and when they need to liquidate gold or erase units, it also happens overnight and I sit thinking did they ever really have the physical to support the outstanding units? and if so, How on earth can they acquire and disperse so much so fast. I guess in the end, I like MNT, it just requires that investors understand that there is a 'premium/discount' to be aware of.

Also, say when MNT is high and I rebalance (sell), I capitalize on the premium. Thats a free 1-7%, and one day when its down/discount and I need to grab some more (buy) to hit my target, hopefully I am at fair price or a discount. This system sees me profiting on the discount/premium. Its kinda timing the market but I cant help that this product works in this capacity.

My wifes pension will be moved into a LIRA in 2 months and if MNT has a premium I will be buying CGL, as its a good second option until I can get MNT at a neutral price or hopefully a discount.
 

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Today MNT shows an 11% premium to NAV so I contacted RCM for their explanation. Below is what I hear from them via email. FYI.

"Thanks for your inquiry. As of early March we have seen the premiums on physical gold bars and coins begin to increase significantly due to supply chain disruptions related to the impact of the covid-19 pandemic. Production at mines, mints and refineries has been adversely impacted while commercial air transport is operating at much reduced levels, meanwhile the demand for bullion has increased significantly. One of the key differences between ETRs and other gold investment listings is that ETRs are exchangeable for physical (EFP), i.e. they have embedded monthly right to redeem for physical gold. Another consideration is in terms of structure - ETRs do not have the daily creation mechanism of ETFs, there is a set number of ETRs outstanding and we may only issue new ETRs from time to time. As you mentioned in your message there is now a substantial premium on physical gold over the spot gold price that is widely quoted. The premium to NAV for gold ETRs has likewise grown to trading currently at the highest levels since the IPO in 2011. Whether this premium remains elevated or declines from here if production returns to normal and supply chains improve is difficult to determine. I've attached a note from CIBC that shows an example of the dislocation that we've seen recently between the spot and physical market prices. The May gold futures contracts on COMEX expire tomorrow as well which may contribute to volatility."

20190
 

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The only reason gold is not 10 thousand an ounce is because there is paper gold.
Economic Terrorists are printing paper gold in the same way that the Federal Reserve is printing dollars.
With this Covid-19 economic collapse many people asked to redeem the paper gold for physical gold and were unable to do so. Those Economic Terrorists who sold the paper gold will soon need to declare bankruptcy because it was all a scam and they do not have the physical gold.
 

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It is surprising to see such a high premium for MNT. I wonder why it is not arbitraged away. Institutional investors (and even retail investors) could short MNT and go long an equivalent in CGL.C or GLD. That could be a very good return without exposure to the volatility of gold. There is of course a possibility that the premium will grow resulting in losses.

If I owned MNT, I would immediately sell it, buy back the underlying in other gold ETFs (resulting in no net change in gold exposure) and pocket the difference. It may not be there after things settle down.
 

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It is surprising to see such a high premium for MNT. I wonder why it is not arbitraged away. Institutional investors (and even retail investors) could short MNT and go long an equivalent in CGL.C or GLD. That could be a very good return without exposure to the volatility of gold. There is of course a possibility that the premium will grow resulting in losses.
It is a good question. One issue in Canada is that we have a lot of ETFs, but not a lot of institutional market makers or authorized participants. Sometimes it's hard to get an institution interested in this kind of market-making... there has to be enough volume, etc to make this worthwhile.

You can see from the bid/ask spreads on MNT that it is lacking in market-making. Why exactly, I don't know, but that's the reality. Well one reason is obvious... they don't have the same creation and redemption method as regular ETFs. So an institution can't one day decide to "make the market" in MNT. To really do this, they would have to redeem for physical gold. That's a whole different ball game than electronic trading and basket creation/redemption.

MNT is not an ETF. It does not have the usual ETF mechanisms, so it can't be easily arbitraged the same way (talking about the ideal arbitrage, where you substitute it for its precise underlying thing).

If I owned MNT, I would immediately sell it, buy back the underlying in other gold ETFs (resulting in no net change in gold exposure) and pocket the difference. It may not be there after things settle down.
This makes sense if you think gold ownership through MNT is equivalent to paper gold owned elsewhere. Personally I am not sure they are equivalent, which is why I don't do what you are suggesting. I think that there may be a tangible benefit holding a gold obligation backed by Canada. As I mentioned somewhere else, MNT is almost like a gold-backed digital currency. It's a certificate/ claim of gold, backed by The Queen.

One consequence of doing the arbitrage you suggest is that you may be selling a fundamentally more valuable thing, for a run-of-the-mill paper gold obligation. It's not a terrible idea, and I thought of doing the same, but decided to hold onto MNT.

On the other hand, when I was filling up my TFSA with new purchases, I did actually buy CGL.C instead of MNT, because I didn't want to buy at the premium.
 

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A counter-argument to my own view above is that, if we consider the history of Great Britain, there is a long history of The King/Queen not honouring their gold obligations. Britain devalued (against gold reserves) several times, for example 1931.

So from that perspective, someone may argue that the gold promise of a commercial institution (like Blackrock) could be superior to a Crown corporation. So maybe it really is a good trade to sell MNT, pocket the premium, and buy CGL.C.
 

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A counter-argument to my own view above is that, if we consider the history of Great Britain, there is a long history of The King/Queen not honouring their gold obligations. Britain devalued (against gold reserves) several times, for example 1931.

So from that perspective, someone may argue that the gold promise of a commercial institution (like Blackrock) could be superior to a Crown corporation. So maybe it really is a good trade to sell MNT, pocket the premium, and buy CGL.C.
The premium that MNT carries suggests to me that the market is more in agreement with your original position (MNT is safer than gold ETFs). My view is that MNT would be safer and would justify a slight premium (maybe 1 or 2%), but 15% is bizarre. So I would be willing to take the small risk for the arbitrage. However, if I were a buy-and-hold investor, I would look for an opportunity to revert back to MNT.

There was this interesting story about (originally West) Germany keeping gold reserves at the NY Fed. During the financial crisis it was alleged that the authorities in NY demurred when the Germans wanted to audit the gold. But this was later denied and Germany got all of its gold back even though it took a few years.
 

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The premium that MNT carries suggests to me that the market is more in agreement with your original position (MNT is safer than gold ETFs). My view is that MNT would be safer and would justify a slight premium (maybe 1 or 2%), but 15% is bizarre. So I would be willing to take the small risk for the arbitrage. However, if I were a buy-and-hold investor, I would look for an opportunity to revert back to MNT.
No question this is an unusual situation and we're all just guessing at the true cause. But I have also been thinking about to my previous favourite physical position, the Central Fund of Canada. This was a closed end fund and had a rather static amount of bars sitting in a vault.

At times, it had a premium to NAV (and got quite large). At times, a discount. CEF had been around for decades and had shown this pattern... it's not like anyone was arbitraging it back and keeping it exactly at NAV.

The reason this is relevant is because I happily held CEF for the long term despite these fluctuations in premiums and discounts. And in hindsight, I think it was the right idea. Some of those premium and discount periods lasted a long time, and I don't think I could have traded around it using GLD and SLV equivalents.

In hindsight, I am glad I simply held CEF for the long term without getting caught up on deviations from NAV. It's kind of inevitable for a closed end fund, and MNT is a similar structure.
 
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