CEF: A Strategic Play for Dual Exposure to Gold and Silver in a Risk-On World

In a world where macroeconomic uncertainty and geopolitical volatility dominate headlines, investors are increasingly seeking assets that balance growth potential with downside protection. The Sprott Physical Gold and Silver Trust (CEF), a closed-end fund offering dual exposure to both gold and silver, has emerged as a compelling vehicle for capital-efficient diversification. With a current market price of $31.45 (trading at a -3.28% discount to its $32.52 net asset value) and a low 0.48% expense ratio, CEF combines the liquidity of exchange-traded assets with the tangible security of physical bullion. This article examines how CEF's unique structure, macroeconomic tailwinds, and undervaluation present a strategic opportunity for investors to hedge against systemic risks while optimizing portfolio efficiency.

Capital Efficiency and Dual Exposure: The CEF Advantage

CEF's dual exposure to gold and silver distinguishes it from single-metal funds like the Sprott Physical Silver Trust (PSLV). As of August 8, 2025, the fund holds 1,257,372 ounces of gold and 52,580,095 ounces of silver, providing a balanced allocation to both metals. This diversification is critical in a macroeconomic environment where gold's role as a safe-haven asset and silver's industrial demand are influenced by divergent forces. For instance, while gold thrives in inflationary or geopolitical crises, silver benefits from its use in renewable energy technologies and electronics. By owning both metals in a single vehicle, CEF reduces the need for investors to manage multiple positions, lowering transaction costs and enhancing capital efficiency.

The fund's low expense ratio of 0.48% further amplifies its appeal. Compared to actively managed precious metals funds, which often charge 1% or more, CEF's passive structure—mirroring the physical holdings of bullion—ensures minimal drag on returns. This cost advantage is particularly valuable in a low-yield environment, where every basis point matters.

Undervaluation and Liquidity: A Case for Immediate Action

CEF's current -3.28% discount to NAV represents a compelling entry point. Historically, the fund's discount has ranged between +1.39% and -6.42%, with the current level near the lower end of this range. This undervaluation is not a reflection of the fund's underlying assets but rather a function of market sentiment and liquidity dynamics. For example, the fund's ability to redeem shares for physical bullion (subject to minimum thresholds) adds a unique layer of value, as it allows investors to convert their holdings into tangible assets—a feature absent in most ETFs.

The discount also creates a margin of safety for investors. If market conditions normalize or demand for physical bullion surges, the price of CEF is likely to converge with its NAV, unlocking capital gains. This potential for undervaluation correction is supported by the fund's strong performance: its NAV has appreciated 30.07% year-to-date in 2025, while the market price has returned 29.35%. The gap between these figures suggests that the fund's intrinsic value is being underpriced by the market, offering a risk-reward asymmetry in favor of buyers.

Macro Tailwinds: Why Gold and Silver Matter in 2025

The demand for precious metals in 2025 is being driven by a confluence of structural and cyclical factors. Geopolitical tensions, including U.S.-China trade disputes and regional conflicts, have accelerated central banks' shift away from the U.S. dollar. Gold, in particular, has benefited from this trend, with global central bank purchases exceeding 900 tonnes in 2025 alone. Silver, meanwhile, is gaining traction in the green energy transition, with its use in solar panels and electric vehicles creating a structural supply deficit.

The U.S. Federal Reserve's anticipated rate cuts in the second half of 2025 are another key driver. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold and silver, making them more attractive to investors. Additionally, the dollar's weakening against major currencies has pushed gold to record highs ($3,395 per ounce as of August 2025) and silver to $38 per ounce, further reinforcing the metals' appeal.

Portfolio Diversification in a Risk-On World

While the term “risk-on” typically refers to equities and high-yield assets, it is increasingly important to incorporate defensive positions that can withstand volatility. CEF's dual exposure to gold and silver provides a hedge against both inflation and equity market corrections. For example, during periods of stagflation—where growth slows but inflation remains high—gold has historically outperformed other asset classes. Silver, with its industrial demand, adds another layer of diversification, as its performance is less correlated with pure investment flows.

Moreover, CEF's liquidity—trading on the NYSE Arca and Toronto Stock Exchange—ensures that investors can adjust their positions quickly in response to market shifts. This is a critical advantage over physical bullion, which requires storage and logistical coordination.

Conclusion: A Strategic Allocation for the Long Term

The Sprott Physical Gold and Silver Trust (CEF) offers a rare combination of capital efficiency, liquidity, and dual exposure to two of the most resilient assets in today's market. Its current discount to NAV, low expense ratio, and alignment with macroeconomic tailwinds make it an attractive addition to diversified portfolios. As global uncertainties persist and the demand for tangible assets grows, CEF's undervaluation presents a timely opportunity for investors to secure exposure to gold and silver at a price that reflects its intrinsic value.

For those seeking to hedge against systemic risks while optimizing capital efficiency, CEF is not just a play—it's a strategic imperative.