June 16, 2010
The scramble for physical is accelerating. Following in the footsteps of PHYS and GLD, yet another gold trust announces a follow-on offering, in which the entire $800 million outstanding under the firm’s previously filed Shelf will be used up. “Substantially all of the net proceeds of the offering will be used for gold bullion purchases, in keeping with the asset allocation provisions outlined in Central GoldTrust’s Declaration of Trust and the related policies established by its Board of Trustees.” $800 million is equivalent to 640k ounces at today’s fixing, or about 20 tonnes. With this 20 tonnes of gold being sucked out of the market, and GLD’s gold NAV hittinging another all time high of 1,306 tonnes, (not so) slowly all the gold is being sucked out of the system. So yes, even as stocks were off to the headless chicken races, gold once again staged a rally, which would make absolutely no sense if the market was at least a little bit less broken. The good thing is that the Fed’s chairman, as confirmed by his last week’s testimony, is just as clueless in justifying this “inexplicable” move in the precious metal. Perhaps if he were to look at the Frankenstein monster of a balance sheet he has created, all his questions would be answered.
From the announcement:
Central GoldTrust (TSX:GTU.U – News)(TSX:GTU.UN – News)(AMEX:GTU – News) of Ancaster, Ontario announced today that it plans to offer Units of Central GoldTrust to the public in Canada (except Quebec) and in the United States under its existing U.S.$800,000,000 base shelf prospectus dated June 8, 2009 and filed with the securities commissions in each of the provinces and territories of Canada, except Quebec, and under the multijurisdictional disclosure system in the United States pursuant to a proposed underwritten offering by CIBC. Central GoldTrust will only proceed with the offering if it is non-dilutive to the net asset value of the Units owned by the existing Unitholders of Central GoldTrust.
The entire original amount of U.S.$800,000,000 provided for in the base shelf prospectus is available for this offering.
Substantially all of the net proceeds of the offering will be used for gold bullion purchases, in keeping with the asset allocation provisions outlined in Central GoldTrust’s Declaration of Trust and the related policies established by its Board of Trustees. Any additional capital raised by the offering is expected to assist in reducing the annual expense ratio in favour of all Unitholders of Central GoldTrust.
This article was posted: Wednesday, June 16, 2010 at 4:12 am