Saltydog Investor examines the reasons for the gold price surge and looks at the funds benefiting the most

In the UK, unit trusts and OEICs (open-ended investment companies) are classified by their Investment Association (IA) sector. There are now more than 50 sectors, each with a precise definition governing what fund managers can and cannot do. The IA monitors the funds to ensure that they are sticking to the rules.

Morningstar provides performance data for most of the sectors, and we include this in our regular Saltydog analysis. However, there are a few sectors (including Specialist, and Commodities and Natural Resources) where average sector returns are not calculated because they feel “performance comparisons may be inappropriate due to the diverse nature of funds in the sectors”.

We have also found that we cover only a handful of funds in some sectors and so we sometimes group them together.

Last month, gold rose in value, something we have not seen since 2019.

The best-performing sector was UK Equity Income, with a one-month return of 4.4%. Due to this, you would have expected one of last month’s top funds to have come from this sector.

However, as I said earlier, average performance data is not provided for all sectors. The best-performing funds last month were actually the gold funds, which are in the Specialist sector, and funds from the Commodities and Natural Resources sector. Neither sector features in the sector performance table above.

The top fund from the UK Equity Income sector was JOHCM UK Equity Income, up 7.8%, while the Ninety One Global Gold fund gained 22.2%.

Saltydog’s top 10 funds in March 2024

Fund name Investment Association sector Monthly return
Ninety One Global Gold Specialist 22.2
BlackRock Gold and General Specialist 19.8
WS Ruffer Gold Specialist 19.3
SVS Sanlam Global Gold & Resources Specialist 16.6
JPM Natural Resources Commodities and Natural Resources 9.7
WS Guinness Global Energy Commodities and Natural Resources 9.5
BGF World Energy Commodities and Natural Resources 9.2
BlackRock Natural Resources Commodities and Natural Resources 9.0
Premier Miton UK Smaller Companies UK Smaller Companies 8.8
VT De Lisle America North America 8.6

Data source: Morningstar. Past performance is not a guide to future performance.

The gold funds have also had a good start to April. In the past two weeks, the Ninety One Global Gold fund has gone up by more than 10%.

Unlike some exchange-traded funds (ETFs), these funds do not just hold physical gold. This is an extract from the Ninety One Global Gold fund’s objectives and investment policy:“The fund invests primarily (at least two-thirds) in the shares of companies around the world involved in gold mining and in related derivatives (financial contracts whose value is linked to the price of the shares of such companies). The fund may invest up to one-third of its assets in the shares of companies around the world that are involved in mining for precious metals other than gold, non-precious metals and minerals and related derivatives.”

This means that the fund’s performance is not linked directly to the price of gold. However, it is closely correlated.

In March, the spot price of gold went above $2,200, for the first time ever, and has continued to rise in April. At the end of last week, it briefly surpassed $2,400.

There are various possible reasons why.

Gold is traditionally considered a “safe-haven” asset and a reliable store of value, particularly during periods of geopolitical uncertainty. Wars in Ukraine and Gaza, coupled with impending elections, most significantly in the US, have fuelled demand for gold.

Another factor supporting prices has been central bank gold-buying since 2022, especially by China, which has bolstered demand for the precious metal. This trend continued throughout 2023 and has carried over into 2024.

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