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Metals funds shine in October as price of gold takes flight

Mutual funds that invest in precious metals outshone all other categories in October as the price of gold soared.

Precious metals funds advanced 12 per cent, on average, to bring their gain for the 12 months to Oct. 31 to a whopping 63.4 per cent, according to figures supplied from globefund.com.

Leading the pack, the $71.5-million Altamira Precious & Strategic Metal Fund rocketed ahead 22.4 per cent in October, the $237.8-million Dynamic Canadian Precious Metals Fund increased 21.5 per cent, and the $263.8-million Sprott Gold and Precious Minerals Fund added 19.2 per cent.

The $422.2-million RBC Precious Metals Fund gained 19.2 per cent, the $65.5-million CIBC Precious Metals Fund rose 18.4 per cent, and the $39.1-million Dynamic Global Precious Metals Fund increased 18.1 per cent.

Gold lost ground at the beginning of October but near the end of the month, the price of bullion had risen again as the U.S. dollar weakened against the European currency.

Craig Porter, portfolio manager for the Altamira fund, notes that the U.S. dollar has been losing ground as investors worry about the massive trade and budget deficits in that country.

As the U.S. dollar weakens, investors shift assets into bullion. "People are treating gold as a currency."

The manager adds that terrorist attacks and suicide bombings in Iraq and Israel also unnerved people during October and may have sent investors fleeing to gold.

"People see it as a safe haven in times of trouble."

Mr. Porter says stocks of junior and intermediate gold producers outperformed some of the senior names. Stocks in his portfolio that posted particularly stellar performances last month include Bema Gold and Eldorado Gold.

Looking ahead, the manager says he expects the U.S. dollar to deteriorate further, which could push gold through the $400 (U.S.) an ounce mark.

The yellow metal may also have gained some shine last month as investors saw dwindling potential for big gains in U.S equity markets after the runup in stocks stretched past six months.

All of the major indexes jumped during a month that is often brutal for stocks. The S&P/TSX composite index added about 4.7 per cent in October.

In New York, the Dow Jones industrial average rose 5.6 per cent, the Standard & Poor's 500-stock index gained 5.4 per cent, and the Nasdaq composite index swelled 8.1 per cent.

Science and technology funds also had a strong showing with an average 7.1-per-cent advance. The group's gain for one year now stands at 26.1 per cent.

Last month, the $30-million (Canadian) RBC Global Technology Sector Fund gained 11 per cent, the $895,000 Franklin Technology Tax Class Fund rose 9.5 per cent, and the $118.7-million AIM Global Technology Class Fund rose 9.3 per cent.

Funds that buy stocks in Asia excluding Japan posted good performances with an average rise of 5.7 per cent. That brings the group's average gain for one year to 18.1 per cent.

The $200.7-million Investors Pacific International-A Fund increased 8.4 per cent, the $31.1-million IG AGF Asian Growth-A Fund rose 6.2 per cent, and the $8.7-million Clarington Asia Pacific Fund gained 6.1 per cent.

Rising metal prices boosted natural resources funds, which rose an average of 5.4 per cent last month. In October, base metal prices alone rose 6.7 per cent, marking the strongest performance in six consecutive months of increases. Prices for West Texas intermediate crude oil averaged $30.35 (U.S.) a barrel, up 7 per cent from September.

The $16.5-million Dynamic Global Resource Fund increased 17.1 per cent, the $110.4-million Altamira Resource Fund added 11.1 per cent, and the $6.1-million Mavrix Explorer Fund gained 11.1 per cent.

Canadian equity funds posted an average return of 4.6 per cent last month to bring their one-year gain to 18 per cent.

The $8.6-million Dynamic Power Canadian Growth Class Fund swelled 14.6 per cent, the $21.9-million Acuity All Cap 30 Canadian Equity Fund jumped 12.9 per cent, and the $42-million Acuity Canadian Equity Fund rose 10.5 per cent.

© 2007 The Globe and Mail. All rights reserved.

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