Tipping point: Should you invest in a world gold fund?

While gold exchange-traded funds have given one-year category average return of 23.28 per cent, international gold funds have given returns of above 30 per cent over the same period. Also known as world gold funds, these schemes invest in stocks of mining companies, and not in gold.

As gold prices start rising, the stock prices of companies that mine precious metals rise even faster, thereby giving better returns than gold. However, it would be best for investors to stay away from these funds. If gold prices fall, the correction in stock prices of mining companies, and hence in these funds, could be even sharper.