Five Gold Mutual Funds To Buy On Immense Upside Potential

It’s been a stunning rally for gold this year, with the yellow metal surging 20% from the end of December to last week’s peak of $1,279.60 an ounce. It is easy to understand why gold was gaining in the beginning of the year, given the slump in oil prices, weak global economy and volatility in the broader markets. Gold has always been held as a safe-haven asset when the stock markets are subject to gyrations.

But the markets have started showing signs of stability as oil prices moved north since Feb 11. Yet, gold continued to shine, finishing last week at a 13-month high and climbing more than 10% in February. Major fundamental issues like demand surpassing supply, higher inflation rate and rate hike uncertainty in the U.S., and concerns about negative interest rates in Japan and Europe had increased the allure for gold.

Gold prices, however, logged its third straight loss this week to settle at $1,257.40 an ounce on Wednesday. Expectations of additional stimulus measures by the European Central Bank boosted the euro, which eventually dulled the shiny metal’s investment appeal. Despite this hiccup, the aforementioned fundamental factors still make gold a bargain, especially after it had suffered for years in a bear market.

Furthermore, there is plenty of room for this metal to climb up. It is still trading at more than 50% below its all-time high of $1,920 an ounce in Sep 2011. Given that there is upside potential for gold, investing in mutual funds having a significant exposure to this metal will strengthen your portfolio.

Let us now look at the core issues that will drive this metal in the near term:

Demand Outstrips Supply

While the World Gold Council (WGC) had stated that output from gold mines was sluggish last year, it also reported that there is strong demand for gold in bullion coins and exchange traded funds like SPDR Gold Shares (GLD). Moreover, demand for gold in emerging countries including China and India remains healthy.

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