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Posted by Shyam as Investment Ideas
The shining metal gold is at its peak and a lot of enthusiasm is still prevailing on the part of investors. Even at current levels investors are engrossed, expressing keen interest towards this metal. Though the demand for jewellery have tumbled at current levels but the aspiration to stay invested with gold has not faded. Numerous gold schemes like, Reliance Mutual Fund, Kotak Mutual Fund and SBI Mutual Fund have witnessed a substantial inflow of funds through investors. These schemes offer the provision of making periodic investment.
The overwhelming response on the part of investors has attracted other AMCs to launch similar types of products. S&P CNX Nifty and Sensex have provided a negative return of -19.66% and -19.93% respectively in the past 1 year. However, Reliance Gold ETF, SBI Gold ETF, Kotak Gold ETF has revealed a positive yield of 33.73%, 33.61%, and 33.63% respectively in the similar time frame.
Last week, ICICI Prudential entered the market with its gold fund-of-fund NFO. Birla Mutual Fund and Baroda Pioneer Mutual Fund have expressed interest to SEBI and have filed drafts for the launch of similar schemes and many others are in the pipeline. SBI mutual fund raised around 500 crore from its gold fund of fund NFO through the SIP route from 1.3 lakhs applicants. Reliance Mutual Fund raised around 500 crore through NFO this February whereas, Kotak MF have generated 80 crore in August. Gold MFs have succeeded, providing a return of around 34% since Jan, 2011. However fixed income products have produced a return of 10-12% annually. Everyone seems to be cashing on in the run up of gold to current levels.
Gold ETFs are quite prevalent but require some time as an investor has to open a Demat account to trade in it. As because of these, many investors were devoid of participating in the recent gold rally. With the fund of fund structure a possible hope for extensive participation on the behalf of investors will increase.
Analysts believe lump sum investment in gold at current levels is not a prudent decision as gold is overbought and may correct to as much as 25% from current levels this year. Experts advise investors to stay invested with gold, but through SIPs as we can further see a major bounce back after correction. Rupee cost averaging (SIPs) actually averages your units thus maintaining a perfect balance.
The real money which was pushed up in the market by US Fed through the means of quantitative easing programmes was the main cause behind these accelerating gold prices. On the other hand Central Banks in developed countries have abstain themselves of printing money. Analyst believe the gold bubble may blast any time as there is no real money left in the market to push up the gold prices.
The European crisis, U.S recessionary concern, surging interest rates, etc make equity market unattractive for quite number of investors. Many fund managers and analysts recommend Gold Mutual Funds as a best source of staying invested with minimum risk.
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