Gold funds shine once again in April

By Vikram Barhat | May 4, 2010 | Last updated on May 4, 2010
2 min read

Precious metal funds posted best returns in April as markets see-sawed over the Greek debt crisis, according to preliminary performance data released by Morningstar Canada.

“Government debt and related currency concerns helped boost the price of gold and other commodities,” said Esko Mickels, fund analyst for Morningstar Canada.

With 12.2% return, Morningstar Precious Metals Equity Fund Index proved to be the best performer for the second time in the past three months, the report said. Thirty-six of the 43 Morningstar Canada Fund Indices had positive returns in April, though 22 of them gained less than 1%.

The three fund indices that track small/mid-cap equity categories posted returns in the top five for the month. In the second place was the Morningstar U.S. Small/Mid Cap Equity Fund Index with a 4% gain, while its Canadian and Global counterparts were fourth and fifth with gains of 2.7% and 2.3%, respectively. The Morningstar Natural Resources Equity Fund Index came third with a gain of 2.9%, the survey reported.

Among large-cap equity categories, North America was the place to be in April. Canada’s S&P/TSX Composite Index posted 1.7% return for the month, edging ahead of the S&P 500 Index’s 1.6%, when measured in U.S. dollars.

The exchange rate between the Canadian and U.S. dollars saw considerable volatility during the month, but these currency movements mostly cancelled each other out. As a result, the Morningstar U.S. Equity Fund Index and the Morningstar Canadian Equity Fund Index had very similar gains, at 1.5% and 1.2%, respectively.

It was a different story, however, in the case of Morningstar European Equity Fund Index which lost 2.1% for the month owing to Greece’s deepening crisis and the soaring loonie, which gained 2.1% over the euro.

“April was choppy as markets zigzagged over concerns about Greece’s ability to service its debt, and the contagion spread to Spain and Portugal,” said Mickels. “As a result, currency markets were wobbly and the euro weakened against major currencies.”

The same impact was felt in the International Equity category, which collectively lost 1.6%, and in the Global Equity category, which posted a measly 0.2% gain.

At the bottom of the list was Health Care Equity. Down 2.5%, it was the worst performer among all fund indices.


Vikram Barhat