Sprott Physical Gold Trust (NYSEArca: PHYS) declined Friday morning while gold prices moved higher after the closed-end fund priced a follow-on offering.
PHYS was deviating from gold prices somewhat because the offering caused the premium to net asset value to contract. Closed-end funds such as PHYS can trade away from net asset value, based on demand for the shares.
PHYS is listed cross-listed on the Toronto Stock Exchange and NYSE Arca, and is managed by Sprott Asset Management, based in Ontario, Canada.
After Thursday’s close, Sprott announced a follow-on offering to acquire physical gold bullion. Friday morning, Sprott priced an offering of 23 million shares at $14.84 each.
PHYS closed Thursday at $15.06 a share, or a nearly 6% premium to the NAV of $14.26, according to Morningstar data. The closed-end fund was underperforming gold Friday because the offering caused the premium to narrow.
PHYS was down 0.9% on Friday morning after a temporary trading halt, while SPDR Gold Shares (NYSEArca: GLD) rose 2.2% along with gold futures. [Sprott Physical Silver Trust Declines After Follow-On Offering]
Trading volume in PHYS exploded Friday after the offering was priced. More than 7 million shares traded in the first two hours, compared with a 3-month daily average of less than 800,000 shares.
The fund is unique because it allows investors to redeem large blocks of shares in exchange for physical gold. The trust stores its gold in Canada.