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Precious Metals Fund (Gold Fund)

A precious metals fund keeps at least 80% of its portfolio continuously in exchange-traded gold and other precious metals or capital market instruments based on them. Known to investors as “gold funds” or “silver funds”, these are defined as precious metals umbrella funds in the CMB’s Communiqué on Principles Regarding Investment Funds (III-52.1).
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Worked example
  4. 4.Interpretation
  5. 5.Pitfalls
  6. 6.Official sources
  7. 7.Frequently asked questions

Key Points

  • They offer exposure to the gold price in small amounts through TEFAS without storing physical gold.
  • Precious metals funds are used as a hedge against inflation and currency risk and to diversify portfolios.
  • gold also fluctuates in dollar terms; when the lira strengthens the fund can post losses.

Formula / Calculation

fund return in TRY ≈ change in the ounce price + change in USD/TRY − fund expenses (ignoring the small cross effect). Funds that keep at least 80% of their total value continuously in a single metal (for example gold or silver) also sit under this umbrella.

Worked Example

Illustrative

Suppose in one month the ounce rises 3% in dollars and USD/TRY rises 2%. The fund’s TRY return before costs is about (1.03 × 1.02) − 1 = 5.06%; with 0.2% monthly expenses the investor’s return is about 4.86%.

The figures are hypothetical values chosen to explain the concept; they are not data for any real fund, stock or market.

Interpretation

Precious metals funds are used as a hedge against inflation and currency risk and to diversify portfolios. Comparing the fund’s return with the gram gold price shows the effect of fees and tracking difference.

Pitfalls

gold also fluctuates in dollar terms; when the lira strengthens the fund can post losses. Fund expenses erode returns over time. Orders may fill at a forward price depending on fund type, so the intraday gold price can differ from the execution price.

Official Sources

Official regulation and sources the definition is based on.

Pages Where This Term Appears

Related Terms

Frequently Asked Questions

A precious metals fund keeps at least 80% of its portfolio continuously in exchange-traded gold and other precious metals or capital market instruments based on them.

fund return in TRY ≈ change in the ounce price + change in USD/TRY − fund expenses (ignoring the small cross effect). Funds that keep at least 80% of their total value continuously in a single metal (for example gold or silver) also sit under this umbrella.

Prepared by: Yatırımcı.AI Research TeamLast reviewed: Method: MethodologyEditorial policy