Gold funds outshine every other asset class

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 52% return in one year (up to September 7). The other two gold funds —DSP Black-Rock World Gold Fund (44%) and Birla Sun Life Global Precious Metal (18% in year-todate) —also gave good returns. Sensex and nifty moved up 11% and 10% respectively during the period.      Gold funds beat the benchmark equity indices in the three-month and one-month periods as well. They have spurted 11% to 12% 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. "Prices should be good for mining operations to sustain. Firms would be able to make profits at these prices.''  Hits $1k globally, pips Rs 16k at home  New Delhi: Gold on Tuesday touched a new peak of Rs 16,200 per 10 gram in the bullion market here on heavy buying ahead of the festival season amid the global rates breaching the psychological $1,000 an ounce level. Standard gold and ornaments gained Rs 200 each at Rs 16,200 and Rs 16,050 per 10 gram, respectively. Sovereign gold also shot up by Rs 50 to a new high of Rs 12,900 per piece of 8 gram. Marketmen said for the first time in more than six months, gold in the overseas markets crossed the psychological $1,000 an ounce level owing to a weak dollar and concern that inflation may rise in the future, boosting the precious metal's appeal. Surprising, gold, which moves opposite trends in stocks, is now moving upward along with surges in bourses. AGENCIESInvestors bet on frontline stocks as sensex rallies  Mumbai: The BSE sensex rose for the third consecutive session to a new 15-month closing high as investors concentrated in frontline stocks while booked profit in midcap and smallcap stocks. The sensex started the day on a flat note but picked up gains in mid-session, witnessed some profit taking near the close but closed with a 107 points gain at 16,132. At Tuesday's close, the index was double its early-March low of 8,047, which was also the low for 2009. Dealers said continuous flow of foreign funds and expectations that slowdown in the economy could be nearing an end, lifted investor sentiment.      The day's trading was also helped by a global rally in metal and commodities stocks. On the BSE too, the Metal index ended 2.5% higher while the Oil & Gas index closed 2% higher. On the flip side, dealers pointed out, that a rally in commodities has the potential to increase input prices for most of the manufacturing companies, and could affect their bottomline.      Among the sensex shares, metals majors Hindalco ended 6% higher at Rs 115 while Sterlite ended 4.8% up at Rs 740. Among other top sensex gainers were SBI, Reliance Industries and Reliance Infra, each ending between 3.5% and 4.5% higher.      The day's buying was again led by FIIs with a net buying figure of nearly Rs 1,000 crore. Domestic funds too showed a net inflow figure, at Rs 206 crore. While investors bought frontline shares, they also booked profit in nonfrontline ones.