Paper And Physical Gold Prices Are Not Decoupling Yet

Like its little brother, silver, gold offered us proof that there is still not variation between “paper” and “physical” prices yet.   The metal-head blogs you read might claim that there is a difference between “paper” and “physical” prices, they might want there to be a difference between paper and physical prices, but there is currently no difference between paper and physical prices.

Sprott’s Physical Gold Trust ($PHYS) priced a secondary offering which gives us the opportunity to do the exact same analysis we did for silver.

I have a snapshot of the Trust details from before the secondary offering:

PHYS pre-secondary

and from after the secondary offering:

PHYS post-secondary

Now it’s just a matter of simple spreadsheet math.   The recipe, from my prior post:

1) We know how many ounces of gold the trust held before the offering

2) We know how many ounces of gold the trust held after the offering

3) thus, we know how many ounces of gold the trust bought

4) We know the number of shares sold in the offering, and the price per share net to the Trust (net of underwriting fees)

5) So we know how much cash the Trust received

6) We know how much cash the Trust had before (total NAV of the Trust – Total Market Value of Gold within Trust), and we know how much cash the Trust has now, so we know how much cash the trust spent on gold

7) cash spent on gold / ounces of gold bought = price paid per ounce of gold.

Voila.    Roughly $1746 per ounce.


Gold intraday 1/31/2012


Looks like PHYS locked in its gold price right after pricing the offering early Tuesday morning.  Nice fill! (/sarcasm)



Disclosure:  no positions in $PHYS

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