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Not to change the topic, but at our house, we are adding to our dry goods inventory to strengthen our at home capacity....
Curious, what kinds of things are you adding? I have a new apartment and need to fully stock it (from scratch). I would love any ideas... I am nervous about getting sick, in an empty apartment, while living alone.
 

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We're all just speculating about the premium and what's going on. I think markets can be dangerous when one doesn't know what's going on behind the scenes.

If you made such a pair trade, you could find yourself a year from now with MNT at a 30% premium to NAV and you'd be "in the hole" on what was supposed to be free money.

The last time precious metals were popular, the premium on CEF remained very high for a long time. Anyone who tried to arbitrage that to GLD and SLV (which were possible trades to make) would not have been very happy.
Do you have any idea on how long the premium remained high on CEF and how high was it, the last time gold was this high?
 

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Do you have any idea on how long the premium remained high on CEF and how high was it, the last time gold was this high?
Central Fund of Canada was significant enough that there are actually indexes which track this. Stockcharts has the !CEFPREM indicator which tracked the premium to NAV on CEF.

You can see that CEF's premium got as high as 27.5% and generally was around 10% during the strong years of this gold bull market.

The premium on CEF, ignoring a couple blips along the way, persisted for 11 years... pretty much the entire duration of that bull market.

So far, the MNT premium has been around for just a few months.

20292
 

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Curious, what kinds of things are you adding? I have a new apartment and need to fully stock it (from scratch). I would love any ideas... I am nervous about getting sick, in an empty apartment, while living alone.
I thought a new thread might be good here....

Then I dont derail the MNT thread....


 

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Looks like MNT hit another all time historic high today and I presume the premium is still very high.

I have a partial position inside my RRSP but don't plan to sell any more MNT.

MNT is now only 11% of my total gold holdings, so the premium isn't an issue. I've diversified among: physical, IAU, CGL.C, and MNT. You might say this is a lot of diversification for a single holding, but I don't completely trust these gold ETF products.
 

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Interesting, having a discussion with a friend and thought I would check on the MNT premium and my XLS file shows it at 19.2% right now.... wow.....

I am 23% MNT, 61% CGL.C, 10% MNS, & 6% physical.... for 100% of my PM allocation.....

I sold my MNT a few weeks back for a premium of 15% ? I think... I'm still happy with that but could have had another 4% if I waited. Isn't 20/20 vision great retrospectively ? I still have a 15% win that I am not crying over.

I will end with, what do we think the premium will eventually peak at ?

On another note, I have recently moved $ from a Pension to a LIRA and have been buying in order to meet allocation targets, and have been chasing bond prices all week with buy orders. They have been on a tear.... consistant or should I say persistently growing price points.
 

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I've shifted half our gold holdings from MNT to CGL.C, cashing premiums of 12-16%.
I'm torn about whether to shift it all. I can't imagine a sound explanation for a premium of this magnitude.
But that could be a failure of imagination.
 

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I sold all the registered mnt, to guard against triggering CG income. If gold drops out of vogue mnt is gonna suffer. I don’t think that will happen soon, but it would hurt....
 

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I'm torn about whether to shift it all. I can't imagine a sound explanation for a premium of this magnitude.
But that could be a failure of imagination.
Because the structure of MNT, there will likely be a premium when gold is hot, and discount when it's not. I don't see this as a major problem as a long term investor. See msg #63 earlier for an earlier example of this with CEF.

Don't forget that MNT has a lower expense ratio than CGL.C. As a long term holder, the premium will come and go, but you will pay those annual fees no matter what.

So the advantage with MNT is that you have lower annual fees and more direct gold ownership with the government. The disadvantage is that it shows a premium or discount and does not track gold precisely.

Here's an article that reviews some of the benefits of MNT

The benefits of ETRs are as clear now as they’ve ever been. “Unlike physical bullion funds or similar gold and silver investment vehicles, the investor directly owns physical gold or silver stored at the Mint,” Caterina said. “You don’t own a unit in a gold-backed fund; there’s no intermediary, which means there’s one less element of cost and risk to think about.”

Investors can also take comfort from knowing that the Mint is backed by the Canadian government. That means the ETR program is treated as a government debt obligation, giving investors recourse to the government should they ever need it.
 

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CGL.C's MER is 0.56% whereas MNT is 0.35% meaning that a long term investor would expect 0.21% higher annual performance in MNT. But does that mean anything when the premium can swing around by several percent?

Weird, there has been a reduction of 900 units (decrease in units outstanding) since June 24. I presume that means that someone has redeemed units, but this is below the threshold for redeeming physical, so I think this means that someone redeemed it for cash value. Why would anyone do that when they could sell on the exchange?
 

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Because the structure of MNT, there will likely be a premium when gold is hot, and discount when it's not. I don't see this as a major problem as a long term investor. See msg #63 earlier for an earlier example of this with CEF.
Thanks for the link.

I agree, this divergence from NAV is not necessarily a major problem. However, when that divergence exceeds 15% that strikes me as something that should prompt a rethink.
If you are correct in that the premium will come and go, that strikes me as an argument to actively arb it.
Speaking of which ...

ETRs are also helped by the arbitrage activity of large hedge funds, Caterina said, which watch out for significant discounts to NAV. When they see a discount of 1% or a little more, they can go on the exchange and buy units at a discount, which they’ll then redeem for physical gold. “That allows the units to do what they should: they trade closely in line with the price of gold and silver.”

The ETRs operate similarly to closed-end funds, which means they don’t have daily creations or redemptions like ETFs. But the Mint does accommodate periodic monthly redemptions and will contemplate issuing new units on the TSX, denominated in US or Canadian dollars, if it sees a market for them.
That's from the article, which is only 8 months old.

So, the Mint was/is expecting arbitrage to keep the NAV in line. Clearly, it's not happening.

Also, the Mint signalled it could create new units if there is a market, but that clearly isn't happening either.

Peculiar.
 

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So, the Mint was/is expecting arbitrage to keep the NAV in line. Clearly, it's not happening.

Also, the Mint signalled it could create new units if there is a market, but that clearly isn't happening either.

Peculiar.
The Mint should absolutely create more units and load more gold into the program. That's the right way to both knock down the price and make a profit for themselves.

If you look at the Level 2 order view for MNT you will also see that it's mostly small retail traders placing bid and asks. For some reason, institutions and market makers are absent.

My guess is that this relates to the COVID shutdown and employees being absent, or possibly the inability to get new physical bars from refiners. The Mint can't issue new units if they can't get the new gold.
 

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So, the Mint was/is expecting arbitrage to keep the NAV in line. Clearly, it's not happening.

Also, the Mint signalled it could create new units if there is a market, but that clearly isn't happening either.
Not sure what are they waiting for. The MNT premium was 20% today and I have sold all remaining MNT holdings (triggering CG) and bought CGL.C.

I do like the lower MER and the option to redeem for physical gold, but considering the 20% premium of MNT vs 0.24% discount of CGL.C I don't think it is worth the risk right now.
It may be an arbitrage opportunity later.
 

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Not sure what are they waiting for. The MNT premium was 20% today
Perhaps they are not in the office. Perhaps the people who normally acquire and bring physical gold into the Mint aren't on the job currently, or the refiners don't have that much gold available.

If the latter is true, the premium would be justified and reflecting physical shortages.
 

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If you look at the Level 2 order view for MNT you will also see that it's mostly small retail traders placing bid and asks. For some reason, institutions and market makers are absent.
As I type, there's a bid for 6,000 shares of MNT at $30.70. That doesn't look like retail ...
 

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As I type, there's a bid for 6,000 shares of MNT at $30.70. That doesn't look like retail ...
OK, good point. I was using iTrade's free Level 2 feature and it only shows the top of the order book. I suppose that retail investors had made their way to the top of the order book (best bids & asks) and I couldn't see those bigger orders at lower prices.
 

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Perhaps they are not in the office. Perhaps the people who normally acquire and bring physical gold into the Mint aren't on the job currently, or the refiners don't have that much gold available.

If the latter is true, the premium would be justified and reflecting physical shortages.
I am wondering if there is an arbitrage opportunity to short MNT and buy long CGL.G. 20% return regardless of what the price of gold does is not too bad.
The current MNT premium is way above the historical average and should eventually revert to the mean once the MNT people go back to the office.
 

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I am wondering if there is an arbitrage opportunity to short MNT and buy long CGL.G. 20% return regardless of what the price of gold does is not too bad.
The current MNT premium is way above the historical average and should eventually revert to the mean once the MNT people go back to the office.
The first question is whether MNT can be sold short. You would have to check with your broker to see if that's possible. Not every stock can be shorted.

The second issue is how long the premium might last. If it takes many years for the premium to fall back to 0% then you would be tying up a lot of capital for little return. And the premium could actually increase.

There is usually a cost to borrow shares short. Say it's a 1% borrowing rate, which your broker would pass on to you. If the premium lasts for 5 years, you might eventually get a 20% - 5% = 15% return, which isn't a great use of your capital.... that's only 2.5% annual return.

So it's not a slam dunk by any means, but might be doable, especially if you have reason to believe that the premium will disappear quickly.
 

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I opted for the middle ground -- not shorting, but not sitting tight, either.
Today, I shifted another tranche of the gold holdings from MNT to CGL.c.
I have only one chunk of MNT left, in a non-reg account with a significant capital gain. So, I'll probably sit on that.
 

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I opted for the middle ground -- not shorting, but not sitting tight, either.
Today, I shifted another tranche of the gold holdings from MNT to CGL.c.
I have only one chunk of MNT left, in a non-reg account with a significant capital gain. So, I'll probably sit on that.
Makes sense. I'm down to 11% weight in MNT and 89% in other gold ETFs, and plan to sit here. No point selling the rest when it's a small relative position. I kind of worry that I sold too much of it in reaction to the premium.
 
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