Gold prices have been soaring: from $1,300 per ounce in June to $ 1,500 in August. It took domestic prices up from Rs 33,000 levels in June for 10 grams to lifetime highs of Rs 38,000 in August. The yellow metal has gained around seven per cent within 10 days in August.
Gold funds giving 213% annualised monthly returns
Kotak World Gold Fund is topping the charts with a one-month annualised return of 212 per cent, followed by DSP World Gold Fund (158 per cent), Kotak Gold Fund (105 per cent) and Kotak Gold ETF (103 per cent).On an average the one-year CAGR return for gold funds is 26 per cent. The top three funds are: DSP World Gold Fund (38 per cent), Kotak World Gold Fund (31 per cent) and UTI Gold ETF with 29 per cent returns.
What is driving the price up?
Industry experts believe slowdown in global growth, volatility in equity markets, dovish central banks and geopolitical worries have led to increased uncertainty. These are the main drivers of gold prices.
Can you expect to get similar returns?
Mutual fund advisors believe investors should not look at gold for return generation. It should be there in every portfolio as a risk diversifier. “Every asset in a portfolio is there for a reason. Gold serves the risk mitigation. Don’t look at gold from return perspective. It is an excellent portfolio diversifier that one can have. Time and again it has proved when real interest rates are going down and when equity markets are not doing well, at those times, gold generally does well,” says Chirag Mehta, Senior Fund Manager-Alternative Investments, Quantum Mutual Fund. He adds, “The trend looks positive, fundamental drivers are in place. You can expect price gains over one to two years.”
Best option for mutual fund investors to invest in gold
Gold ETFs are the best way to invest in gold, say mutual fund advsiors. “Gold ETFs are very price efficient. Gold ETFs bring the wholesale market price efficiency to the retail level despite you buying a very small denomination like half a gram or one gram. It is 100 per cent physically backed. You don’t have to worry about storing, insurance and liquidity. The biggest advantage is liquidity,” says Chirag Mehta.