Bangalore: Mutual fund investment in gold yields the best and high returns rather than equity and bond funds, in terms of both returns and growth in asset base. On the contrary the equity and bond funds are facing the consequences of dull and feeble market conditions and are also fluctuating between the ever changing interest rates, but Gold funds has capitulated more than 30 percent returns for investors.

According to the data provided by the Value Research, gold funds includes exchange traded funds (ETFs) and gold fund-of-funds (FoFs), have gained 27-31 percent in comparison to large-cap equity funds, short-term bond funds and income funds, which has yielded an average of -23 percent, 9.04 percent, 8.2 percent respectively in the past one year.

As per the data provided by the Association of Mutual Funds of India, in the period of January to November 2011, the asset bases of gold ETEs have grown up to 167 percent to 9,658. Most surprisingly, in the last two years, gold mutual funds assets have raised nearly 570 percent. When the gold prices increases, the gold ETFs yields higher returns. Hence these profitable features of gold funds are leading to the price-rise of gold. In January 2011, the price for 10 grams gold was 20,585, which rose up to 29,140 in November.

The gold-price slightly fell in December to 26,570. "Gold prices fell towards the year end because of holiday season in developed markets and year end settlement of overseas investment funds that have exposure to gold", stated by VP Nandakumar, the Chairman of Manappuran Group.

But the Economic crisis in Europe and inflationary pressure spreading vastly in the emerging markets will maintain this high price of gold. Experts have predicted that this price hike will remain firm for the next one year. Manapurram Group, which owns one of the largest gold loan companies,Goldman Sachs, Reliance Mutual Fund and Kotak Mutual Fund are some of the other companies which have a high profit out of gold fund.

Analysts say this yellow metal will retain as an 'inflation guard' and 'safe harbor asset', despite the rise of dollar value. In terms of price, gold and dollar are inversely proportional, i.e. when the dollar value rises, the gold price falls.

"Dollar is still the reverse currency of the world not because it is the best of the lot, but because it is the least bad. Even if dollar index were to rally and possibly it can rally to 84 next year, gold might not fall much and only consolidate sideways," stated by Ritesh Jain, Head of Investments, Canara Robeco Mutual Fund. He believes this drift will continue for 3-4 years. He said, "I expect gold prices to breach 35,000 per 10 grams by middle of next year".

CARE report says the gold demand will grow constantly year by year, as culturally in India there is an unending demand of gold and is risk free as an investment. These reasons will always provoke the investors to buy gold. In 2010, the gold demand grew nearly up to 11 percent to 4,000 tonnes. India, stated to be the world's largest gold consumer, holds 55 percent of the global gold jewellery demand and 52 percent of gold investment demand. Thus it can be said, demand for gold will never come to an end in India.

Bangalore: Mutual fund investment in gold yields the best and high returns rather than equity and bond funds, in terms of both returns and growth in asset base. On the contrary the equity and bond funds are facing the consequences of dull and feeble market conditions and are also fluctuating in between the everchanging interest rates, but Gold funds has capitulated more than 30 percent returns for investors.