Portfolio Adjustment: ASA Gold and Precious Metals Limited Purchased

By on July 29, 2011

This morning the SMA portfolio had a cash balance of 1.6% of assets.  Today the cash was used to purchase shares in ASA Gold and Precious Metals Limited (ASA), a closed-end fund trading at a 10% discount to its Net Asset Value (NAV).  ASA invests in precious metals mining companies throughout the world.

ASA has seriously underperformed the price of gold over the past three months.  Below is a chart exhibiting this divergence:

The difference in performance between physical gold and mining shares has been explained as being caused by the miner’s costs going up faster than the price of the metals themselves.  This may be exaggerated and temporary.  Mining shares appear to be very reasonably priced based on this perception.

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