Sprott Physical Gold and Silver Trust: A Discounted Bet on Precious Metals in a Volatile World

In an era of geopolitical tensions, inflationary pressures, and shifting monetary policies, investors are turning to hard assets for both income and diversification. The Sprott Physical Gold and Silver Trust (CEF) offers a unique entry point into the precious metals market, currently trading at a 4% discount to its net asset value (NAV) while expanding its capital-raising capabilities through an updated ATM equity program. Let's dissect why this trust stands out as a strategic play in today's market.

The Undervalued Opportunity: A 4% Discount to NAV

As of June 30, 2025, CEF's NAV stood at $31.31 per unit, while its market price closed at $30.10, representing a 3.87% discount (slightly below the 4% figure reported for July 1). This discount is within the historical range of -6.42% to +1.39% since the trust's 2018 inception. For investors, this means buying $31.31 of physical gold and silver for $30.10—a 1.21-cent-per-ounce advantage on the trust's holdings.

The discount isn't an anomaly but a recurring feature of closed-end funds (CEFs). However, in a market where precious metals are poised for a rebound—gold hit record highs in early 2025, and silver's industrial demand (think solar panels and EVs) is surging—the current undervaluation creates a compelling contrarian entry point.

Balanced Exposure: Gold's Safety + Silver's Growth

CEF's structure offers dual exposure to gold and silver, a rare combination in the precious metals space. As of June 2025, the trust holds:
- 1.26 million ounces of gold
- 52.8 million ounces of silver

This split leverages gold's role as a safe-haven asset (critical in times of geopolitical instability, like Russia-Ukraine tensions or China-U.S. trade disputes) and silver's industrial upside. Silver's price has lagged behind gold in recent years—up just 8% in USD terms since 2023 versus gold's 15% rise—but its undervaluation relative to its 2020 peak (now 30% lower) suggests pent-up potential.

The trust's physical holdings also eliminate counterparty risk, a key advantage over futures-based ETFs. Investors own a proportional share of the actual bullion stored at the Royal Canadian Mint, a critical differentiator in a market where synthetic instruments often disappoint.

Strategic Flexibility via the Expanded ATM Program

In June 2025, Sprott announced a $1 billion expansion to its “at-the-market” (ATM) equity program, allowing it to issue new units to raise capital at prevailing market prices. The program's benefits are twofold:
1. Capital Discipline: Management can issue shares opportunistically—e.g., when silver dips to $20/oz or gold pulls back due to dollar strength—thereby scaling assets during dips.
2. Discount Management: Issuing shares at the current market price (which is below NAV) could narrow the discount over time, as new capital flows into the trust's holdings.

The ATM program also ensures liquidity, with sales executed through top-tier agents like Cantor Fitzgerald and BMO Capital Markets on both the NYSE and Toronto Stock Exchange. This bifurcated structure maintains regulatory compliance while maximizing accessibility for global investors.

Why Now? Macroeconomic Tailwinds and Geopolitical Risks

The case for CEF strengthens when considering the broader macro backdrop:
- Inflation and Monetary Policy: Central banks are stuck between high inflation and slowing growth, creating uncertainty. Precious metals often shine in such environments.
- Dollar Weakness: A declining U.S. dollar—driven by fiscal deficits and Fed rate cuts—typically boosts gold and silver prices.
- Geopolitical Risks: Escalating tensions in the South China Sea, energy supply disruptions, and nuclear talks with North Korea keep safe-haven demand elevated.

Risks and Considerations

No investment is without drawbacks. Key risks include:
- Persistent NAV Discount: If the discount widens further (beyond its historical -6.42% floor), it could deter buyers.
- Metal Price Volatility: A sharp decline in gold or silver prices would hit NAV directly.
- Structural Costs: The 0.47% management fee, while low, eats into returns in sideways markets.

The Bottom Line: A Compelling Contrarian Play

Sprott Physical Gold and Silver Trust (CEF) offers investors a rare combination: physical exposure to two metals, a discounted price, and strategic capital flexibility via its ATM program. With silver's industrial story gaining traction and gold's safe-haven appeal intact, this trust is well-positioned to benefit from both price appreciation and narrowing discounts.

Investment Thesis:
- Buy: For long-term investors seeking diversification and a hedge against inflation/geopolitical risks.
- Hold: If you already own CEF, but monitor the discount closely.
- Avoid: If you're purely speculative or prefer leveraged ETFs.

In a world where uncertainty is the only certainty, CEF's undervaluation and balanced exposure make it a standout pick for investors willing to look beyond short-term noise.

Data as of June 30, 2025. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.