By Barry Critchley, 
Financial Post · Saturday, Sept. 18, 2010

The price of gold is at record levels, yet investors still believe it is set to move higher. That’s the only logical interpretation to draw from the news that Sprott Physical Gold Trust, formed this year to hold bullion, has rounded up at least $280-million of new investment dollars in its latest financing. (The other interpretation: The lemmings theory is at work.)
That financing, done by way of an overnight marketed deal, was announced after the markets closed on Thursday and priced before the markets opened yesterday.
The result: The issuer sold 24.5 million trust units at $11.37 per unit. The units were sold at a 10¢ discount to the closing price the day the deal was announced. The issuer has a rule that the “net proceeds of the offering will be greater than 100% of the most recently calculated net asset value per unit of the trust prior to the pricing of the offering.”
According to its website, the fund’s NAV was $10.87, which means the units traded at a premium. The underwriters — RBC Capital Markets and Morgan Stanley — were given the option to sell another 3.675 million units. The units closed yesterday at $11.30.
That gold continues to rise is no surprise to Eric Sprott, the founder of Sprott Asset Management. Almost two years ago, he said that, “in the sea of financial assets and currencies that are being decimated the world over, the one true safe haven continues to be gold.”

So far, that view is working out. This week’s deal is the second since Sprott Physical Gold went public this year. In its IPO, the issuer raised US$442.50-million via the sale of 44.25 million units at US$10 per unit. In May, it followed up with a US$279.45-million deal via the sale of 24.84 million units at US$11.25 per unit.
Sprott isn’t the only issuer to gather up investor interest in physical gold.
In May, the Central Fund of Canada closed the sale of 25.3 million units at U.S.$14.85 per share, for gross proceeds of US$375.7-million. It too has a pricing rule: It must be non-dilutive and accretive for the existing shareholders. The issuer invested most of the proceeds “in gold and silver bullion in international banker bar denominations.” After that deal, it
owned 1.5 million fine ounces of gold and 75.2 million ounces of silver.
Last November, it raised US$230.2-million via the sale of units priced at US$13.56 a time. The units closed yesterday at US$16.14. In 2009, Central Fund completed four offerings that raised a total of US$701.6 million. Central GoldTrust has also been active. In June, it raised US$280.2-million, with all the proceeds being invested in gold bullion. (The ompany owns 604,676 fine ounces of gold bullion and 6,156 ounces in gold certificates.) As with Central Fund, the price of the units is “non-dilutive and accretive for the existing unitholders.”
In 2009, it closed two issues, one for US$38-million in January and another for US$200.2-million in May.