CEF: It's Silver's Turn

2025-04-24 04:54:49 ET

Summary

• I'm reiterating a 'buy' for CEF due to its balanced precious metals exposure, but noting Silver's underperformance against Gold and Copper.
• Gold is currently overheated with a potential pullback, while Silver is undervalued and poised for a potential aggressive rotation.
• CEF's Gold to Silver ratio has shifted from 2:1 to over 3:1, making PSLV a better play for a bullish Silver thesis.
• Holding CEF for balanced exposure, but recommending PSLV for those seeking aggressive Silver exposure due to its better technical setup and NAV discount.

In October 2024, I covered the Sprott Physical Gold and Silver Trust (CEF) for Seeking Alpha with a 'buy' call due to the fund being overweight Silver ( XAGUSD:CUR ) relative to the market capitalization of both metals. At that time, I made the argument that a 10:1 ratio was more reflective of a real-world Gold/Silver weighting and CEF was far more allocated to Silver than Gold ( XAUUSD:CUR ):

I am reiterating my 'buy' of CEF for investors who want broad precious metals exposure in a single, easy to understand fund. I think the 2:1 weighting for Gold is exactly where precious metals investors want to be if they expect Silver to outperform Gold for the next 6-12 months, as I do. I hold that view for several reasons. First, Silver has lagged Gold as a monetary metal. Second, Silver has lagged Copper as an industrial metal. Third, either way you view the metal, it has been in a supply/demand deficit for 6 years if data from the Silver Institute is to be believed.

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