Gold Funds Bounce Back

Gold funds were among the best performers in January, managing an astonishing 20% return in just one month. Is this the beginning of a gold rally?

Emma Wall 5 February, 2014 | 11:16AM
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Gold funds have bounced back this year - returning weary investors up to 23% in January alone. After two years of drastically falling in value, funds that invested in gold equities and mining shares outperformed all other sectors. 

Investor favourite BlackRock Gold & General has increased 8.5% in 2014 - providing some respite to investors who lost 48% last year. The fund, which is Gold Rated by Morningstar analysts, benefitted from a stellar run until the end of 2010, after which volatility set in. The fund's manager Evy Hambro said that this could in part be blamed on the fall in the gold price. But thanks to improvements in corporate governance, Hambro said gold miners should start to perform better this year. 

BlackRock World Mining, Hambro's Gold Rated investment trust only managed a 1% rise.

Although among the biggest gold funds, Gold & General was not the best performer. This accolade went to Junior Gold which has returned 20% year-to-date. Charteris Gold and Precious Metals Fund is up 13% this year.

Latin American funds dominated the worst performing list, largely due to currency depreciation and the hit of the Federal Reserve tapering its quantitative easing plans further. 

Rob Morgan of stock brokers Charles Stanley said that January proved a difficult month for most major stock markets. 

"Weaker-than-expected economic data from the US and China, plus concerns that the tapering of US quantitative easing would weaken investment flows into emerging markets were the main factors,” he said.

Some expect this slide to continue this year – with Fidelity’s Tom Stevenson saying that macroeconomic fundamentals support developed rather than developing indices.

Gold bugs are divided as to whether the commodity will fall further or pick up this year. The gold price is intrinsically linked to gold equities, and so will affect gold funds.

Shaun Port, chief investment officer at ETF investor specialists Nutmeg, said the precious metal was one of the biggest losers in 2013 and it no longer holds its safe-haven status as an investment. “While jewellery demand will remain strong, we think that the gold price is due another 20% fall, after the suffering a 28% drop last year - its biggest decline since 1981,” he said. “Retail investors still own too much gold instead of stocks. Another good 12 months for equities will see further gold sales.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BlackRock Gold and General A Acc1,291.57 GBP0.73Rating
BlackRock World Mining Trust Ord603.29 GBX0.05Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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