Gold has surged to record prices, driven by expectations of interest rate cuts from the U.S. Federal Reserve and a rising backdrop of political and economic uncertainty. The precious metal has risen 22% year-to-date, making it one of the standout performers among major commodities in 2024. Over the past 12 months, gold has experienced a remarkable rally of 32.8%, with the recent acceleration in its price attributed to increased market volatility.
Performance of Major Gold Funds
Several gold funds have notably benefited from this rally, with varying degrees of success. The performance of gold funds can differ significantly based on their investment strategies, particularly between those investing directly in gold bullion and those focused on gold mining stocks. Mining stocks tend to be more volatile due to factors specific to individual companies, such as operational leverage, management quality, mine productivity, and geopolitical risks.
Here are 12 major gold funds available in Singapore and Hong Kong, ranked by their return over the past 12 months:
L&G Gold Mining UCITS ETF
Description: This passive ETF tracks the STOXX Global Gold Miners index.
Performance: The fund has performed exceptionally well, benefiting from the concentrated nature of its benchmark index, which includes 34 mining companies with large positions at the top. Newmont, the world’s largest mining company by market capitalization, represents 15.1% of the index.
Key Advantage: The concentration in large-cap miners has driven superior returns.
BlackRock GF World Gold Fund
Description: An actively managed fund with a $4.1 billion AUM.
Performance: The fund has shown strong performance year-to-date but lags slightly behind over the past 12 months.
Key Advantage: Offers a blend of active management strategies and diversification within gold mining equities.
Schroder ISF Global Gold Fund
Description: Managed by James Luke, this $628 million fund focuses on gold and silver miners.
Performance: The best-performing active gold strategy, benefiting from its exposure to both gold and silver miners.
Key Advantage: Exposure to silver miners adds diversification, though silver has not matched gold’s gains as an investment metal.
Jupiter Gold and Silver Fund
Description: This fund holds substantial allocations to silver miners in addition to gold miners.
Performance: Has not outpaced gold’s year-to-date gains, due in part to silver’s performance lagging behind gold.
Key Advantage: Diversified exposure to both precious metals.
Market Dynamics and Fund Strategies
Gold funds investing in mining stocks generally outperform those investing directly in gold bullion due to the additional leverage and potential for higher returns associated with mining companies. However, this comes with increased volatility and risk, as mining stocks are influenced by a broader range of factors compared to gold prices alone.
Impact of Interest Rate Cuts and Market Conditions
The surge in gold prices and corresponding fund performance is closely tied to expectations of Federal Reserve rate cuts. As rates are anticipated to fall, the appeal of gold as a non-yielding asset increases, driving investment into gold funds. Gold’s status as a safe-haven asset further amplifies its attractiveness during times of economic and political instability.
Silver, often seen as an industrial metal due to its use in various applications like solar panels and medicine, has not matched gold’s performance as an investment asset. This discrepancy has impacted funds with significant allocations to silver miners.
Conclusion
Gold funds have benefitted significantly from the metal’s strong performance in 2024, with mining-focused funds generally outperforming those investing directly in gold bullion. The varying success of these funds highlights the importance of understanding their specific investment strategies and market dynamics. Investors looking to capitalize on gold’s upward trajectory should consider both the inherent risks of gold mining stocks and the potential benefits of diversified gold and silver exposure.
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