Sprott Asset Management has increased the size of a planned initial public offering for a gold bullion fund to US$862.5-million amid a hot market for the precious metal.

Yesterday, Sprott filed an updated prospectus with regulators for the Sprott Physical Gold Trust, a closed-end bullion fund that plans to list shares in Toronto and New York. The IPO proposes selling 75 million units of the trust at US$10 each. If the over-allotment is fully exercised, another 11,250,000 units will be sold as well.

When the IPO was first proposed in December, it aimed to raise a more moderate US$575-million.

The prospectus says that the trust offers a low-cost way to buy or sell gold bullion, and it gives investors the opportunity to redeem units of the fund for physical gold. The gold will be stored at the Royal Canadian Mint.

The Sprott offering is the latest of several bullion funds that have popped up over the last year as gold prices soared. The fact that it is coming from hedge fund guru Eric Sprott is not a surprise, as he has been one of the world's most outspoken gold bulls.