Gold funds gave an yearly return of 7.27 per cent in 2009-10. The performance

RELATED ARTICLES Fitch cuts Japan debt rating, outlook negative Gold demand to slow as disposable income drops: WGC France, Germany want to keep debt-stricken Greece in euro zone Gold falls to 4-1/2 month low on Greece risks Bond prices rise on resumption of market operations by RBI

of the yellow metal was better than debt funds, but nowhere near equities.

The 7.27 per cent return from gold funds was much lower than 23.23 per cent in 2008-09.

Debt funds gave a return of 5.41 per cent during the past financial year, against 7.35 per cent the year before. On the other hand, the performance of equity funds has been much better at 73.76 per cent, against a negative return of 36.19 per cent during the previous year. “The quality of gold as a risk diversifier has also come into the fore in financial year 2010 with returns being higher than those from debt funds. It must be also said that returns were much lower than that given by equity funds,” said Krishnan Sitaraman, director of credit rating agency Crisil.

However, during the January-March quarter of 2010, gold returns remained in the negative territory at 2.42 per cent. During the same quarter in 2009, it was 11.30 per cent. In February, the average returns for gold exchange-traded funds (ETFs) had become positive at 1.72 per cent from negative 2.63 per cent in January. In December too, the returns were negative at 7.27 per cent.

The average monthly price of gold in the spot market was Rs 16,864 per 10 gm in March and that in the first quarter was Rs 16,870, said K Gautham, metal analyst with JRG Wealth Management. “The average yearly price has gone up from Rs 13,159 in financial year 2009 to Rs 15,956 in financial year 2010 fiscal,’ said Gautham.

Meanwhile, assets under management (AUM) of gold funds in FY2009-10 have more than doubled and inflows too were higher. “This could be attributed to increased awareness of gold ETFs as a convenient way to invest in gold, as well as the fact that for the most part of the year, gold ETFs have given positive returns,” said Sitaraman.

AUM of the six gold ETFs — Gold BeES, UTI, Reliance, SBI, Kotak and Quantum — was more than 115 per cent in the year, against 736 crore in 2008-09. AUM rose to Rs 1,583 crore till February-end 2010.