Driven by geopolitical tensions and continuous buying from central banks, the price of gold hit a historic high on Thursday (March 20), marking a cumulative increase of nearly 40% since the beginning of the year. Although there was a slight pullback on Friday, the decline was moderate, with the main gold futures contract on the New York Mercantile Exchange (COMEX) falling only 0.8% to close at $3020 per ounce. However, in the eyes of some market bulls, this gold bull market is far from over.
When the stock market faces uncertainty, investors flock to safe assets that can preserve value during market volatility, so the prices of gold and silver often rebound. Historically, both metals have performed well during periods of geopolitical instability, economic recession, and inflationary shocks. However, the challenge lies in purchasing and storing physical metals. If you buy gold or silver in person, you may be troubled by dealer spreads, storage costs, insurance fees, and security issues. This is both inconvenient and expensive.
Many savvy investors prefer to invest in precious metals through Exchange Traded Funds (ETFs). Here are two closed-end funds (CEFs), one focused on gold and the other on silver.
For pure gold investment, one of the best options is the Sprott Physical Gold Trust (TSX:PHYS). This closed-end fund holds $9.8 billion worth of gold, equivalent to 3,340,284 ounces of gold. What stands out about PHYS is that it holds fully allocated gold, meaning every ounce is actually stored and recorded, not just backed by paper claims.
More uniquely, PHYS can be exchanged for actual gold, allowing investors direct access to the metal—a feature that most gold ETFs cannot offer. This structure makes PHYS a stronger alternative to some traditional gold ETFs.
The Management Expense Ratio (MER) of PHYS is 0.41%, making it a cost-effective way to invest in gold without dealing with storage, insurance, or security risks.
For silver investment, the Sprott Physical Silver Trust (TSX:PSLV) is the preferred choice. This closed-end fund holds $6 billion worth of silver, equivalent to 180,613,426 ounces of silver.
Like PHYS, PSLV’s silver is also fully allocated, meaning every ounce is actually stored and recorded. Investors also have the option to exchange shares for actual silver, a feature that most silver ETFs cannot provide.
Although PSLV offers a more direct and secure way to invest in silver, the cost is slightly higher. The Management Expense Ratio (MER) is 0.59%, reflecting the higher costs associated with storing and insuring large amounts of physical silver.
