Rupee rise dents gold funds

Gold exchange traded funds recorded negative average return of 6.57 per cent in the month ended Tuesday. Fall in domestic gold prices due to weak overseas trend resulted in domestic gold funds losing their shine.

Of the two gold exchange traded funds, Gold Benchmark Exchange Traded Fund gave 6.55 per cent negative returns, while UTI Goldshare registered 6.60 per cent negative returns.

Speaking on reasons for the negative return, a fund official from UTI Mutual said, "There is no active fund management strategy adopted in these structured products as they replicate the performance of international gold prices."

Overseas, prices of the yellow metal fell as hedge funds liquidated their position with the strengthening of dollar against other major currencies such as euro and sterling.

Back home also, gold prices fell tracking overseas market trend and owing to the appreciating rupee. However, the fall in gold prices led to a rise in demand as can be witnessed in the increase on volume.

According to the National Stock Exchange data, the traded volume of Benchmark Mutual's Gold BeES increased to 11,380 units on Tuesday from 2,459 units on April 22.

On Friday, the scheme registered the highest traded volume of 20,286 units.

Traded volume of UTI Mutual's Goldshare rose to 4,575 on Tuesday against 2,593 shares on April 22. On May 11, it had traded at a record high volume of 20,531 units.

Interestingly, it must be noted that gold funds had witnessed huge demand on April 19 and April 20.

Investors had bought big quantities of gold exchange traded funds on April 19 due to the Akshay Tritiya festival that is considered to be an auspicious day on the Hindu calendar.