Eric Sprott runs a range of hedge funds, precious metal funds and other funds in Canada. I am invested in his gold fund (PHY-U).
I have written before about Sprott’s Silver Funds (PHS-U and PSLV). Something strange happened on Thursday, the funds fell 4% for no apparent reason. Here is a chart of PSLV against the SLV (SLV is a huge silver ETF).
The objective of PSLV is to track the price of silver, which it is clearly not doing. A quick scan found several blog entries trying to explain why PSLV was behaving like this. The bottom line is that I don’t really understand what is going on with this fund, and you should never invest in something that you don’t fully understand.
So, could the same thing happen to the gold fund (PHY-U) which I own. Well, I don’t know but I’m worried that perhaps I don’t understand this investment either. There is another problem: PHY-U is illiquid. The bid-ask spread is often quite large and the volumes are sporadic. Given the risk of sudden drops in the price and of illiquidity I think it’s time to get out, and get into a simpler vehicle such as the GLD (a huge gold ETF). I will consider…