After years of losses, international funds focused on gold and gold miners are up sharply. In the past three months, DSP BlackRock World Gold Fund has given spectacular returns of 64.92 per cent and Kotak World Gold Fund is up 64.89 per cent. “Two factors have affected the performance of these funds. The underlying metal-gold witnessed a rally recently. Due to this, the stocks of gold miners are back in demand, leading to the stellar returns,” says Lakshmi Iyer, chief investment officer (debt) and head products at Kotak Asset Management.
When gold prices are low, companies shut mines as cost of production is higher than the prevailing price of the metal. When gold prices head north mines start becoming viable, which help companies report better profits. Stocks of such companies were battered for many years. With gold price rising, we are witnessing value buying in these stocks. “In the past few months, stock price of international gold mining companies are up between 80 and 200 per cent,” says Kaustubh Belapurkar, director-fund research, Morningstar India.
