Gold ETFs sizzle with 28% gains in one year

Yellow Metal Prices Set To Go Up Further Chennai: If you are one of those who had put money into gold exchange traded funds (ETFs) a year ago, the yellow metal has not only turned out to be a great asset protector but also a solid wealth generator. Gold ETFs have turned in stellar 28% gains in the last one year when the other 26 fund categories—including debt, hybrid and equity—have struggled to break the average 20%-mark.      What's made them a safer option is that all gold ETFs have same returns (since all the ETFs are tracking the same commodity) while there is a huge divergence in the other fund categories—sometimes 40-50%—between the best and worst schemes. With gold (as an asset) assuming significance after the world went into a slump, ETFs, which track the metal price, rose in tandem as stocks fell. The gains logged by gold ETFs come in a period when equity funds focussed on banking and FMCG have delivered around 18-19%, GILT (medium and long-term) schemes have given 13% returns, monthly income plans posted 12% gains and sensex gained a mere 9%, data from fund tracker ValueResearch shows.      Currently, there are five gold ETFs, such as Gold Benchmark ETF, Kotak Gold ETF, Quantum Gold, Reliance Gold ETF and UTI Gold ETF with more than 1 year history. SBI MF launched its Gold ETF in April this year. With Chinese consumers buying gold aggressively—coupled with the onset of the festive season in India—experts say gold prices will go up further.      "For the last 15 years, the dollar has depreciated while gold prices have inched up. For the record, gold has delivered 16-17% compounded annual growth rate (CAGR) for the past 9 years. If high crude prices continue to push inflation, it will make gold more attractive as an inflation hedge,'' Amar Shah, head, research (commodities), Angel Broking, said.      In New Delhi, gold is trading at around Rs 15,200 per 10 grams. Investors have clearly identified gold as a part of their asset allocation strategy, feels Krishnan Sitaraman, director, Crisil Fund Services.      "Gold's allure lies in the fact that it has proven its mettle during downturn. Gold ETFs are have a direct correlation with prices. While gold may not repeat its stellar performance like that in 2008, it's a must for every investor now,'' he said.