In times of turbulence, when equity seems to have lost out in race, fund houses have begun to cash in on the interest generated by the yellow metal. Gold has gained over 57% in the last two years. But, the moot question is: does it make sense to invest in the metal at current levels?
Fund managers and investors have been the beneficiaries of the spike in gold prices in last two years and both gold exchange traded funds (ETFs) and world gold funds (WGFs) have become highly popular among investors these days.
Gold ETFs are mutual funds that invest directly in pure gold while WGFs invest in equities of gold mining companies across the globe. Both these categories of mutual fund schemes have generated handsome returns for the investors, though WGFs have been affected by the stock market meltdown.
Gold ETFs, whose returns are directly linked to the gold price, have generated over 20% returns in last one year. The spectacular show by this category has resulted in healthy inflows into these schemes. Since January 2008, the assets (AUM) of gold ETFs has surged by about 59% to Rs 756 crore by the end of March this year.
Currently five fund houses offer gold ETFs in India, but more are gearing up to join the group. Recently SBI Magnum joined the bandwagon of Benchmark, UTI, Reliance, Kotak and Quantum, who currently offer gold ETFs. Interestingly, Kotak AMC now plans to launch another gold fund. According to its offer document filed with Sebi, the new gold fund would be a feeder fund that would invest in existing gold ETFs.
WGFs have also put up a decent show in the last six months. These are however feeder funds and thus not actively managed in India. Both AIG and DSP Blackrock, the only two fund houses currently to have WGFs, manage these funds through their internationally based parent gold fund.
While the equity meltdown did impact WGFs, especially in the first half of the last fiscal, the sensational rise in the gold prices did benefit the stocks of gold mining companies where WGFs usually invest. Both the WGFs have thus reported more than 50% rise in returns over the last six months, which is even higher than the rise in gold prices.
Encouraged by the rising price of the gold, fund houses are now devising plans to diversify portfolios to incorporate the yellow metal . While UTI has launched a wealth builder fund that invests in equity, debt and gold ETFs, Sundaram BNP Paribas is also planning to launch a scheme on similar lines whose offer document has been filed with Sebi. Investors can now thus look forward to many more options to invest in gold.
But is it the right time to invest in gold schemes?
Recently a brief rally in equity markets resulted in the fall in gold prices from $967 an ounce to $865 in just two weeks. If the equity rally continues for some more time, gold prices may see further downside and may see the the range of $840- $800.
Historically too, the April-September period has been a subdued one for gold. However, if gold manages to close above $915- $920 in the coming days, the metal could rise to around $1000 by the second half of the current year.Nevertheless, gold’s outstanding performance last year continues to makes it one of the most preferred investment avenue for several investors.
Fund managers and investors have been the beneficiaries of the spike in gold prices in last two years and both gold exchange traded funds (ETFs) and world gold funds (WGFs) have become highly popular among investors these days.
Gold ETFs are mutual funds that invest directly in pure gold while WGFs invest in equities of gold mining companies across the globe. Both these categories of mutual fund schemes have generated handsome returns for the investors, though WGFs have been affected by the stock market meltdown.
Gold ETFs, whose returns are directly linked to the gold price, have generated over 20% returns in last one year. The spectacular show by this category has resulted in healthy inflows into these schemes. Since January 2008, the assets (AUM) of gold ETFs has surged by about 59% to Rs 756 crore by the end of March this year.
Currently five fund houses offer gold ETFs in India, but more are gearing up to join the group. Recently SBI Magnum joined the bandwagon of Benchmark, UTI, Reliance, Kotak and Quantum, who currently offer gold ETFs. Interestingly, Kotak AMC now plans to launch another gold fund. According to its offer document filed with Sebi, the new gold fund would be a feeder fund that would invest in existing gold ETFs.
WGFs have also put up a decent show in the last six months. These are however feeder funds and thus not actively managed in India. Both AIG and DSP Blackrock, the only two fund houses currently to have WGFs, manage these funds through their internationally based parent gold fund.
While the equity meltdown did impact WGFs, especially in the first half of the last fiscal, the sensational rise in the gold prices did benefit the stocks of gold mining companies where WGFs usually invest. Both the WGFs have thus reported more than 50% rise in returns over the last six months, which is even higher than the rise in gold prices.
Encouraged by the rising price of the gold, fund houses are now devising plans to diversify portfolios to incorporate the yellow metal . While UTI has launched a wealth builder fund that invests in equity, debt and gold ETFs, Sundaram BNP Paribas is also planning to launch a scheme on similar lines whose offer document has been filed with Sebi. Investors can now thus look forward to many more options to invest in gold.
But is it the right time to invest in gold schemes?
Recently a brief rally in equity markets resulted in the fall in gold prices from $967 an ounce to $865 in just two weeks. If the equity rally continues for some more time, gold prices may see further downside and may see the the range of $840- $800.
Historically too, the April-September period has been a subdued one for gold. However, if gold manages to close above $915- $920 in the coming days, the metal could rise to around $1000 by the second half of the current year.Nevertheless, gold’s outstanding performance last year continues to makes it one of the most preferred investment avenue for several investors.
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