Gold funds delivered the highest returns in January as uncertainty surrounding Trump’s tariff plans sent investors flocking to the safe haven asset class.
Markets became nervous that the new president’s 25% tariff on imports from Canada and Mexico and 10% levy on Chinese goods could trigger a trade war that would alter global trade dynamics.
Gold’s price reached £2,275 per ounce today (3 February), up from £2,103 at the beginning of January.
Funds such as Baker Steel Gold & Precious Metals, Jupiter Gold and Silver, and BlackRock Gold & General benefited the most from this surge in demand, beating all other Investment Association funds with total returns of 17.4%, 17.3% and 16.6% in January.
See also: Gold heading for fresh highs as inflation and tariff fears rise
Following close behind them was Charteris Gold & Precious Metals, Quilter Precious Metals Equity, and Ninety One Global Gold, which were up 16.3%, 16.2% and 16.1% respectively throughout the month.
And gold’s rally could have further to climb yet, with many unknowns still lingering over how the affected countries may react – not to mention the nations that could yet have tariffs placed on their goods.
Russ Mould, investment director at AJ Bell, said: “The prospect of a full-blown trade war has spooked investors as they weigh up the prospect of widespread retaliation by countries on the receiving end of Donald Trump’s tariff frenzy,”
“Affected countries aren’t going to take the hit lying down and a tit-for-tat scenario is now looking real. That could result in higher inflation and put a stop to further interest rate cuts for the time being – exactly the opposite of what equity investors want to happen.”
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On a sectoral level, IA Latin America had the best month in January, rising 11.4% on average thanks to its high exposure to commodities. Funds in the sector collectively hold over a third (35.3%) of their assets in basic materials and industrials.
But IA Latin America’s strong month could be short lived, according to Ben Yearsley, investment director at Fairview Investing. After being the worst performing sector of 2024 (falling 25% on average), last month could be a “dead cat bounce,” he said.
India delivers worst returns
Commodity portfolios may have had a strong start to the year, but IA India funds suffered the worst returns in January as the nation forecast its slowest economic growth in four years.
The latest Economic Survey projected gross domestic product to grow by 6.3% to 6.8% over the coming year, down from 8.2% last year.
Funds in the IA India sector fell 5.2% on average throughout January, with some dropping further than others.
Invesco India Equity was the worst performing fund of the month, with returns dropping 10.6%. It was followed by Ashoka Whiteoak India Opps and Comgest Growth India, which fell 9.6% and 9% respectively.
This story was written by our sister title, Portfolio Adviser
