Sprott discloses that the gold fund can trade at premiums or discounts to net asset value.
PHYS typically trades at a premium to NAV, says Morningstar analyst Mike Taggart in a report on the trust.
“Investors need to be aware that although legally the fund is structured as a trust, it trades as a closed-end fund. High premiums paid for shares could result in investor returns that do not track gold prices,” he wrote.
PHYS was launched in 2010 and there have been five secondary offerings that have collectively raised more than $1.5 billion in net proceeds, Taggart added.
“This trust has traded at a premium for most of its existence, and for much of that time it traded at a premium above 10%,” he said. “Investors need to be aware that, should they purchase shares at a steep premium, their returns will lag the returns of gold.”
Sprott Physical Gold Trust
Full disclosure: Tom Lydon’s clients own GLD.