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Rising gold prices lead precious metals funds to outperform

Group's 12-month return averaged 32%

Rising gold prices helped equity funds that invest in shares of gold and precious metals producers to post an average gain of 4.1 per cent in May to outperform all other mutual fund categories.

Precious metals funds outpaced all competing categories last month to bring the group's return for the 12 months ended May 31 to an average of 32 per cent, according to data from Globe Hysales.

Last month, the $369.7-million iUnits S&P/TSX Capped Gold fund jumped 11.3 per cent, the $2.8-million Sentry Precious Metals Growth fund added 9.1 per cent, and the $104.1-million TD Precious Metals fund gained 7.5 per cent.

The $55.7-million Altamira Precious & Strategic Metal fund rose 7.2 per cent, the $190.2-million Dynamic Canadian Precious Metals fund increased 6.2 per cent, and the $352.1-million RBC Precious Metals fund added 5.3 per cent.

Craig Porter, portfolio manager for the Altamira fund, said the price of gold dipped as low as $374 (U.S.) an ounce during May, but recovered by the end of the month to close at the $395 level.

Mr. Porter said a weakening U.S. dollar, increased tension in Iraq, and a terrorist attack in Saudi Arabia, which killed 22 people, all fuelled the rise in bullion.

Investors often buy gold in tumultuous times because it is seen as a safe haven.

The manager added that soaring oil prices and strong economic growth in the United States are raising fears of inflation.

"People buy gold as a store of value in times of inflation."

Mr. Porter says the U.S. dollar is likely to remain weak this year, and he believes gold will hit $450 by the end of 2004.

He adds that investors will likely remain jittery if terrorist attacks continue.

"That's a problem that's not going to be solved right now."

Funds that invest in science and technology stocks gained ground in May with an average advance of 3.1 per cent. The group's average one-year jump now stands at 22.3 per cent.

In May, the $116.7-million (Canadian) iUnits S&P/TSX Capped IT fund swelled 11.8 per cent, the $14.3-million Franklin Technology fund increased 6 per cent, and the $3.9-million Renaissance Global Technology fund rose 5.7 per cent.

Tech stocks also rose on the Nasdaq Stock Market, where the composite index was up 3.5 per cent in May.

At the Toronto Stock Exchange, the benchmark S&P/TSX composite index rose 2.1 per cent in May.

Canadian equity funds edged up 1.3 per cent, on average, last month. For one year, the group has posted an average return of 22.9 per cent.

Last month, the $16.5-million Clarica Canadian Large Cap Value fund rose 4.9 per cent, the $237.6-million CIBC Canadian Imperial Equity fund gained 4.7 per cent, and the $403.2-million Talvest Canadian Equity Growth fund added 4.5 per cent.

Equity funds that invest in Japan lost ground last month, with an average drop of 4.1 per cent. The downturn trims the group's average gain for one year to 50.5 per cent.

In May, the $25.2-million BMO Japanese fund slipped 1.8 per cent, the $83.4-million AGF Japan Class fund edged down 2.6 per cent, and the $11.8-million MIX Japanese Class fund lost 2.8 per cent.

Emerging markets funds retreated an average of 3.3 per cent in May to reduce their average gain for one year to 34.1 per cent.

The $6.7-million HSBC Emerging Markets-I fund decreased 1.3 per cent, the $37.5-million CIBC Emerging Markets Index fund dropped 1.7 per cent, and the $67.5-million BMO Emerging Markets fund slipped 1.8 per cent.

Natural resources funds edged up an average of 0.6 per cent in May. For one year, the group has an average gain of 36.4 per cent.

Last month, the $18-million Dynamic Global Resource fund rose 5.7 per cent, the $43.3-million CIBC Canadian Resource fund gained 3.9 per cent, and the $109.4-million Altamira Resource fund increased 3.7 per cent.

Category performance

Returns as of May 31, 2004

....................................Returns

Fund..........................1-mth.........1-yr.

Alternative strategies.......- 1.2%........9.9%

Asia ex-Japan equity........- 3.3 .........30.0

Asian/Pacific Rim eq.......- 3.5..........38.5

Canadian balanced.............0.2..........13.0

Canadian bond..............- 0.7.............2.8

Canadian dividend............0.6...........16.9

Canadian equity...............1.3..........22.9

Cdn. Equity (Pure)...........1.9...........25.0

Cdn. Income trusts...........0.2...........18.7

Cdn. Money-market..........0.1...........1.7

Canadian mortgage.........- 0.7..........2.4

Cdn. short-term bond...... - 0.5..........2.4

Cdn. small-to-mid-cap eq...- 0.2.........36.5

Cdn. tactical asst alloc........0.7..........13.4

Emerging mkts. equity.....- 3.3...........34.1

European equity...............0.3..........24.7

Financial services.............0.1...........22.1

Foreign bond..................0.0............0.6

Global bal./asset alloc..... - 0.1...........15.7

Global equity................- 0.1...........22.2

Health care.................- 0.9............17.8

High-yield bond............- 1.3............8.6

International equity........- 0.6............28.2

Japanese equity............. 4.1............50.5

Labour-sponsored.........- 1.5............-2.8

Latin American equity.... - 1.0...........28.9

Natural resources............ 0.6...........36.0

North American equity.......0.7...........17.3

Precious metals...............4.1...........31.9

Real estate.....................1.9..........17.2

Science & technology.........3.1..........22.3

Specialty/miscel................0.1..........14.8

U.S. equity.....................0.7..........15.0

U.S. money market...........0.0............0.2

U.S. small-to-mid-cap eq.....0.7...........23.1

SOURCE: GLOBE HYSALES

© 2007 The Globe and Mail. All rights reserved.

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