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Why Central Fund of Canada Has Barely Budged This Year

As we approach the halfway point for 2012, now's a good time to look back at what's happening with the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Central Fund of Canada (AMEX: CEF  ) . The closed-end fund couldn't be simpler, owning an almost 50-50 mix of gold and silver bullion. But as the precious-metals play has risen and fallen, Central Fund has gotten carried along for the ride. Let's take a quick look at how the stock is doing so far this year.

Central Fund of Canada Stats:

2012 YTD Return 0.9%
Assets Under Management $4.78 billion
Gold Ounces Owned 1,694,644
Silver Ounces Owned 76,964,103
Premium to Net Asset Value 5.4%
CAPS Rating ***

Source: S&P Capital IQ.

Why is Central Fund of Canada basically unchanged for the year?
If you only look at Central Fund's current share price compared to where it ended 2011, you might think the year has been pretty boring. But precious metals have moved sharply in both directions in 2012, with gold rising to nearly $1,800 per ounce before falling back to current levels around $1,585. Silver has seen similar volatility, with prices spiking above $37 per ounce early in the year but currently trading almost $10 below that level.

Yet central banks have been voracious in their appetite to boost their gold reserves. In fact, Foolish gold expert Christopher Barker suspects that one major reason that gold and silver have seen their prices fall back stems from possible intervention from central banks to keep prices low.

If you think gold and silver are poised to rise, one advantage to using Central Fund instead of the more popular SPDR Gold (NYSE: GLD  ) or iShares Silver (NYSE: SLV  ) is that Central Fund shareholders can elect special tax treatment, as it's what's called a Passive Foreign Investment Company, which would potentially allow you to get a preferential tax rate on gains compared to the SPDR or iShares funds. Sprott Physical Gold (NYSE: PHYS  ) and Sprott Physical Silver (NYSE: PSLV  ) have the same advantages, but Central Fund gives you both gold and silver in a single package.

Weak precious metals prices have held back Central Fund of Canada, but if you like gold stocks, we've got a mining company that might be able to do better. Read the Motley Fool's latest special report on gold to discover the tiny gold stock digging up massive profits. It's free but only available for a limited time.

Click here to add Central Fund of Canada to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger owns shares of Central Fund of Canada. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 26, 2012, at 7:57 PM, Jellywig wrote:

    So Dan, you seem to know a little bit about metals. Do you think CEF will post some gains this year?

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10/27/2016 4:01 PM
CEF $13.30 Down -0.05 -0.37%
Central Fund of Ca… CAPS Rating: ***