I want to invest in gold funds. I would like to know how DSPBR World Gold Fund & AIG World Gold fund are different from the gold ETFs available in the market. Kindly explain the correlation between the gold prices and the NAVs of DSPBR World Gold Fund & AIG World Gold Fund. Is this a good time to invest in them?
- Bharat Khurana
There are two kinds of gold funds available in India. Firstly, the Gold Exchange Traded Fund (ETF), that tracks the value of gold by investing in physical gold. Secondly, there are funds that invest in companies in gold mining and related businesses through other overseas funds. DSPBR World Gold Fund and AIG World Gold Fund are of the second type.
Coming to your second query, there is no direct correlation between the gold prices and the NAVs of DSPBR World Gold Fund and AIG World Gold Fund, but generally the share prices of these companies tend to benefit from the rise in gold prices. But one should always remember that both of these (DSPBR World Gold and AIG World Gold Fund) are thematic funds and as they invest in equities, their fall or rise could be much steeper than that of gold prices. This is clear from the fact that in 2008, when Gold ETFs that track gold prices delivered a return of 25 per cent, DSPBR World Gold Fund was down by around 19 per cent. Also, thematic funds are only meant for diversification, therefore one can have a small allocation to these funds but should never be the core holding of any portfolio.