Gold funds top performers in August

(September 2, 2004) Investors holding gold-based mutual funds had a reason to smile in August, as strong bullion prices pushed gold funds to the top of the performance charts, according to early data from Morningstar Canada.

The monthly report shows an even split between Morningstar’s 32 fund indexes, with half gaining and half losing ground. Still, that’s an improvement from July, when 22 of the 32 indexes turned in a negative performance.

The Morningstar Canada Precious Metals Fund Index was the top performer on a month-over-month basis, rising 5.9% after a dismal July sent the index lower by 5%

“That’s not unusual for this volatile sector, which during the past year has experienced one-month returns ranging from 15.3% in October 2003 to -17.3% in April 2004,” the report said. “The index has lost 19.7% so far in 2004.”

Gold prices were buoyed in August by a number of factors which made bullion a more attractive store of wealth than the U.S. dollar.

“Disappointing economic data out of the U.S. was responsible for the greenback’s fall,” said David O’Leary, Morningstar Canada senior analyst. “Initial jobless claims rose for the first time in four weeks and second-quarter U.S. GDP was revised downward.”

After gold, Latin American Equity and Emerging Markets Equity rounded out the top three fund groups, with gains of 3.1% and 2.3%, respectively. The top three fund indexes on a year-to-date basis are Canadian Income Trusts (up 7.5%), Japanese Equity (7.2%) and Latin American Equity (up 7.1%).

Among the underperforming indexes, technology funds languished, as the Science and Technology index dropped 4.4%. Tech-related funds were hurt by an 8% retreat on the Nasdaq.

The U.S. Small and Mid Cap Equity index and the Natural Resources index were close behind, with losses of 2.7% and 1.1%, respectively. Natural Resources was the top performing index in July, however, and the downward shift is due to the fluctuating price of crude oil.

Broadly based equity funds, which make up the bulk of Canadian mutual fund investments, were mostly lower in August. The Canadian Equity index slipped 1.2%, Canadian Pure Equity fell 0.9% and U.S. Equity dropped 0.8%.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com