Gold Mutual Funds-80% returns in 1 year-Should you invest now?

Gold Mutual Funds - 80percent returns in 1 year - Should you invest nowGold Mutual Funds – 80% returns in 1 year – Should you invest now?


You might have surprised to know that DSP Black Rock World Gold fund gave 80% returns in last 1 year. Last month I gave recommendation of this mutual fund as part of best international funds which gave over 15% returns in just 1 month. Gold prices in India would have risen 20% to 25%. World gold funds invest in gold in international markets as well in mining companies, hence are able to earn such high returns in line with international markets. Which are the gold funds which earned such high returns in last 1 year. What the top factors that affected to raise gold prices in international prices? Should you invest in such gold funds now?

Which are the gold funds which earned such high returns in last 1 year?





There are 2 gold funds (not ETF’s) that invests in international gold as per their investment objective. They invest in gold in the international market as well as gold mining companies across the world. Hence the rising in gold prices or returns in such funds cannot be attributed directly to domestic gold price changes.

Also Read: Top Performing Mutual Funds in last 10 years

1) DSP Black Rock – World Gold Fund


  • It gave 80% returns in 1 year.
  • It gave 35% returns in 6 months.
  • It gave 15% returns in 1 month.

2) Kotak World Gold Fund


  • It gave 89% returns in 1 year.
  • It gave 35% returns in 6 months.
  • It gave 16% returns in 1 month.

What the top factors that affected rise in gold prices in international prices?





While there are several factors that are affecting to increase in gold prices, a few top ones are indicated here.

1) Brexit Impact


After Brexit (Britain Exit from European Union), gold prices started rallying. FTSE100 index has recovered to some extent within 1 week of Brexit. However, Interest towards gold is increased. Many believe that investing in gold is safe investment now.

2) Interest rates fear





Generally, interest rates fall, demand for gold investment would increase. Bank of England said no expectation of interest rate hikes and would slash rates below 0.5% post fear of Brexit. This is making investors go crazy for investment in gold.

3) Dollar Depreciation


Gold and US Dollar have inverse relation. Means when the dollar appreciates, gold prices would fall and vice versa. In the last few months, compared to a bunch of 10 major currencies has appreciated by 8% to 10% over US Dollar. This is adding fuel to gold prices.

4) Gold demand increase in China


Chinese love gold. They feel that gold is a safe investment option. China Central Bank has raised gold reserves to 71.4% (up by 2.8%). Individuals and investor companies in China are buying gold for liquid, tangible assets expecting that this can be used when the Chinese currency weakens.

Also Read: Ways to invest lump sum investment in mutual funds

Should you stay invested in gold?


In domestic markets in India, gold prices have appreciated between 20% to 25% in last 6 months to 9 months. Gold funds in India that are investing in international gold markets or gold mining companies have benefitted more and reaped returns of over 80% in last 1 years. However, we don’t expect that superb returns to continue in future. While such gold funds may earn some good returns in the short term, in the medium to long term, you may be little cautious. Brexit, dollar depreciation, etc., would not come every year. If you are objective is for short term, you can make a try by investing in such world gold mutual funds.

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Suresh
Gold Mutual Funds – 80% returns in 1 year – Should you invest now



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