Mutual Funds

Gold ETFs trump Sensex, Nifty

Yoganand D | Updated on January 26, 2020 Published on January 26, 2020

Return over 20% in the past year against the backdrop of geopolitical tensions, global slowdown

The global price of gold registered a multi-year high at $1,610.9 per ounce on January 8, 2020, due to escalating geopolitical tension between the US and Iran.

Tracking the global trend, the MCX gold, too, recorded a new high at ₹41,293 per 10 gm on that day, and currently hovers around ₹39,900.

Global push

Global gold price got a major push in June 2019, on multiple factors — a US Federal Reserve meeting in June that hinted the beginning of a Fed rate cut cycle, the uncertainty of the US-China trade war and concerns of a global slowdown. Following the footsteps of the global price, the domestic price of the yellow metal also trended upwards.

A weakening rupee against the dollar also kept the commodity price northwards and increased the appeal of gold as a safe haven.

Against this backdrop, domestic gold funds and gold exchange-traded funds (ETFs) have clocked more than 20 per cent gains in the past one year.

 

ETFs are passive investment instruments that are based on gold prices and invest in gold bullion.

There is complete transparency on the holdings of an ETF as it follows direct gold pricing. ETFs have much lower expenses than physical gold investments.

Currently, there are 11 gold ETFs and 10 gold ‘fund of funds’ available in India. Gold ‘fund of funds’ invest in gold ETFs.

In the past six months, gold funds and gold ETFs have recorded an average gain of 13.5 per cent.

They have posted an average return of 22.6 per cent in the past one-year period.

Top performers

Invesco India Gold Fund tops the chart over the past six months and one year by delivering 17 per cent and 26.4 per cent returns, respectively. Aditya Birla Sun Life Gold Fund has gained 15.6 per cent in the past six months, while its one-year return was 21.9 per cent.

Among the gold ETFs, Axis Gold ETF has done well during these time frames by delivering 13 per cent and 23 per cent, respectively.

HDFC Gold ETF and IDBI Gold Fund have underperformed this category (gold funds and gold ETFs) average in the past six months as well as one year.

Interestingly, over the past one year, gold funds have outperformed the Sensex and the Nifty returns of 14.6 per cent and 12.5 per cent, respectively, retaining their safe-haven appeal.

Published on January 26, 2020
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