ASA Gold (NYSE:ASA) – Trading at 13% NAV Discount

  • ASA Gold (NYSE:ASA) is a closed-end precious metals fund managed by Merk Investments LLC.
  • Selling at a discount of -13% to NAV, I feel that it is a good name to add exposure to smaller precious metal miners.
  • Fundamentally positive view on the gold price over the next near term
  • Gold’s an imperfect inflation hedge, but still attractive.

About the Fund

ASA Gold & Precious Metals Limited (NYSE:ASA) is a closed-end precious metals and mining fund. ASA seeks long-term capital appreciation through investments in gold, silver, platinum, and diamond exploration/development projects or the mining of precious metals and minerals. In addition, they can own securities like ETFs that replicate the price movement of gold, silver and platinum bullion.

Axel Merk of Merk Investments LLC took over ASA investment duties in April 2019. Since then, there has been a major shift away from large cap miners toward mid-cap and small cap miners.

Top Ten Portfolio Holdings

The fund owned 105 positions at the end of May. ASA is well diversified with a similar setup to a sector mutual fund focused on gold and silver miners. However, compared to VanEck Vectors Gold Miners ETF, ASA is oriented much more towards the smaller cap mining names.

Looking at ASA’s largest shareholding, Orla Mining is an unfamiliar name to most of us. It is a Canadian mining company (TSE:OLA) with a market cap of about US$1b. They have 3 projects in Mexico, Panama and Nevada. All 3 projects are in feasibility stage, which means these projects are not operational so the company does face some significant risks here. These mines may end up not being as productive or economically viable as the company expects.

The fund itself is considered diversified, with assets that are based out of multiple countries:

NAV Discount to Gold and Silver Assets

As of the September 24th close, the fund’s net asset value was $14.94 per share. However, the trust was trading hands at a 13% discount to NAV with a quote of $13.00.

If we look at the chart above, ASA has always been trading at a discount to NAV. One of the reasons for the discount could be that ASA pays a very low dividend of 0.1% yield. Another concern with ASA may well be that the fund is largely smaller producers who are leveraged. As such, should there be a significant market decline, this fund could have an even deeper decline.

The discount of ASA’s share price is ultimately showing the demand for ASA shares. The higher the demand, the lower the discount.

In my opinion, a more effective way to reducing discount to NAV is to do share buybacks. This will help boost investment performance.

Performance Review

Above is the 5 year total return comparision charts against

  • VanEck Vectors Gold Miners ETF (GDX)
  • VanEck Vectors Gold Junior Miners ETF (GDXJ)
  • Main gold bullion play SPDR Gold Shares ETF (GLD)
  • Barrick Gold Corp (GOLD).

Notice how ASA has generated higher returns compared to the rest.


Outlook in the Gold, Precious Metals and Minerals Sector

It’s a frustrating time to be a gold & silver mining investor.

Gold has been stuck in a rut for the past few months. It is battling higher US Treasury yields, especially in the interest-rate sensitive short-end, that continue to dull the allure of the precious metal.
Softer US yields and limited risk appetite should normally play in favour of gold, but we see the contrary happening. The strength of the US dollar clearly overshadows gold, and prevents it from gaining at a time it could potentially gain.

Strong USD Keeps Gold Pressured

The reason for gold remaining pressured lower is due to the interplay between real yields and the USD. Strength in the USD is a headwind for gold and this provides part of the reason for gold weakness. Real yields are simply the US bond yield minus inflation expectations. So, if the nominal bond yield is 5%, but inflation is 6% then the real yields is -1%. When real yields fall, that lifts gold prices. So, real yields have pulled back a little, but they are still relatively elevated.

Cost to Spike Due to Inflation

Global miners BHP Group (ASX:BHP), Rio Tinto Group (ASX:RIO) and Newmont Corp (NYSE:NEM) warned that inflationary pressures will cause their annual cost to increase.

Inflation and the shortage of materials and labor are expected to handicap mining companies under construction or modernization. This correspondingly lead to higher prices for precious metals. Declining gold price and increasing cost will reduce the margins of these miners in the short term.

What Does It All Mean For The Gold Market

Well, the US economy is going to slow down, but that doesn’t automatically mean that the Fed will bring inflation under control. Rather, we could have stagflation, which should be positive for gold prices. 

Meaning to say, there is a light at the end of this tightening tunnel. The light that could make gold shine. The deteriorating macroeconomic outlook should boost safe-haven demand for gold, while a very steep pace of hikes could make gold find its bottom and start its next rally.

Gold A Hedge Against Inflation

While I still believe gold can serve as an efficient hedge against equity risk, the yellow metal is still subjected to liquidity risk. Gold is an asset that will be dumped as investors raised cash.

Gold can help protect your assets from the loss of purchasing power caused by inflation. This is because gold shares many of the same characteristics as other commodities that rise in value during an inflationary period.

Gold, in particular, is in short supply, and increasing it requires actual human or mechanical labor. It cannot be created from thin air, as fiat currency can. This is why, during inflationary periods, investors tend to buy gold.

Another option is to invest in gold mining companies, which should see their profits and revenues rise as gold prices rise. As a result, this could be a viable option for someone looking to protect their purchasing power against inflation.


Gold is a commodity asset. It does not generate any revenue on its own. Thus, when investing in commodities, it is critical that we do not overpay for any asset in our portfolios.

In the case of a closed-end fund like ASA, I would use net asset value (NAV) to determine its fair value.

The net asset value of a fund is the total current market value of all of the fund’s assets minus any outstanding debt. It is the amount that the shareholders would receive if the fund were immediately liquidated.

Fund Overview

As of September 23, 2022, the fund had a net asset value of $14.94 per share but it currently trades for $12.42 per share. This gives the fund a 13% discount to net asset value at the current price, which is very close to the 14% discount that its shares have had in the 52wk average. The price certainly looks reasonably attractive here.

But of course, ideally it would be better we invest in ASA when it is closer to its 52wk low discount of 17.92%.



ASA could offer investors a way to protect their wealth against inflation by owning gold and precious mining companies. It is a good way to have some exposure to these assets in your portfolio as they have historically served as a good hedge against inflation.

I am leaning on bullish gold and silver going into end 2022 due to supply and demand issue and the weakening macroeconomic conditions.

ASA represents a risk-adjusted addition to exposure to this sector as it is selling at a huge discount to NAV. I also like the exposure to smaller cap mining companies including some early-stage investments.


Hope you enjoyed this piece. If you like to read more of my case studies, click here.


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