Gold funds dazzle on price rise

COIMBATORE: The equity markets may be on a roll but gold has dazzled everyone bringing stellar returns to investors. Gold funds that invest in gold mining companies and overseas equity funds that have an exposure to such companies, have outperformed every other asset category in the last one year.

AIG World Gold Fund topped the performance chart with a 51.7% return in one year (up to September 7). The other two gold funds ��� DSP BlackRock World Gold Fund (44.4%) and Birla Sun Life Global Precious Metal (17.7% in year-to-date) ��� also gave good returns. Sensex and nifty moved up 10.5% and 9.8% respectively during the period.

Gold funds beat the benchmark equity indices in the three-month and one-month periods as well. They have spurted 10.5% to 11.9% in the past week alone. Incidentally, these funds have outperformed even gold exchange traded funds (ETFs) that gained about 36% in the past year.

Gold ETFs, which invest only in the physical units of gold, get only the benefit of an upturn in the prices of the yellow metal. However, gold funds cash in on the improvement in fortunes of mining firms, which give higher returns than the yellow metal during a bull run, say industry observers. Gold funds also managed to beat ETFs in the short run when gold prices jumped in March this year.

Gold prices have spurted over the past few days on the back of renewed concerns about the sharp rally in equity markets and inflation fears due to excess liquidity in the system, say market observers. Spot prices of the yellow metal crossed the $1000-an-ounce mark on Tuesday, the highest since March 2008, according to Reuters data.



"Higher gold prices and improvement in profitability of mining companies have boosted sentiments," says Lakshmi Iyer, head (Fixed Income and Products) at Kotak Mahindra Mutual Fund.