A safe-haven appeal made gold one of the few popular investment spaces at the start of this year when the markets turned upside down. While the major benchmarks – Dow, S&P 500 and Nasdaq – are striving to return to positive territory, gold has witnessed a strong rebound.

This precious metal went through a rough patch over the past three years and touched the six-year low level after the Fed opted for a rate hike last December. Mutual funds having significant exposure to securities related to gold, struggled alongside. And like a true ally, a strong rebound in gold has also lent a solid boost to these funds in the year-to-date frame.

Spot price of gold on the New York Mercantile Exchange has gained nearly 5.2% so far this year. In fact, the yellow metal has been the best-performing non-agricultural commodity so far this year. Moreover, SPDR Gold Shares (GLD), which tracks the performance of gold bullion, has attracted nearly $959.2 million in assets this year.

This impressive performance propelled the broader mutual fund categories including Commodities Precious Metals and Equity Precious Metals. While the former category has gained 6.9% year-to-date, the latter is up nearly 4.4% in the same timeframe. In such a backdrop, precious metal mutual funds with significant exposure to gold-related securities look very attractive as an investment option. Here’s a lowdown on the gold rebound.

What Made the Rebound Possible?

The continuing slump in major benchmarks, which led investors to seek shelter in safer assets, was primarily behind this recovery. The markets are suffering from a nagging oil slump, a weak Chinese economy and a flurry of soft domestic economic data since the start of 2016. The recently released economic data out of China indicated that stimulus policies opted by the central bank failed to live up to expectations.

China’s official manufacturing purchasing managers index (PMI) fell from 49.7 in December to 49.4 in January. More importantly, the reading has fallen below 50, which indicates contraction in activities for the sixth straight month. Moreover, Chinese non-manufacturing PMI declined from 54.4 in December to 53.5 in January. Meanwhile, the International Monetary Fund (IMF) and World Bank recently lowered their outlook for Chinese economic growth.

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