Four of the fund’s top-10 holdings were already either bullion or gold mining companies, but the manager looked to take advantage of cheap valuations in mining stocks last month."The bullion price has been firm of late and the yellow metal remains the cornerstone of [the] fund," he said.
"In contrast, share prices of gold mining companies have been anything but strong."
He highlighted the relative cheapness of the Philadelphia Gold & Silver index, which has recently sunk to a 30-year low.
"Our contrarian instincts drove us to add to the fund’s existing holdings in miners Newmont and Newcrest during the quiet days in August," he explained.
Trojan currently holds 11.6 per cent in bullion – split between the Gold Bullion Securities ETF and ETFS Physical Gold fund, which are its two biggest holdings. Lyon’s Personal Assets Trust has an even larger position in gold, with its weighting tipping the 14 per cent mark.
Evy Hambro, manager of the BlackRock Gold & General fund, believes the disconnect between gold and gold equities presents a significant opportunity – but only for selective investors.
He commented: "In recent years, the performance of gold equities has been disappointing and the sector trades at a substantial discount to bullion. Indeed, equities have historically traded at current levels when gold prices were some $500 lower."
"Does this represent an opportunity for investors? It depends. Some gold equities, with a strong production growth profile for example, such as Eldorado Gold, have the potential to add significant value to shareholders, while others will find it more difficult to re-rate relative to bullion."
"Another feature of the gold industry has been an increase in dividend payments. Many companies have at least doubled their dividends, albeit off a low base, and we are encouraging this trend and expect to see it continuing," Hambro added.
Expectations of another round of quantitative easing in the US and China’s $158bn infrastructure programme announced last week have been met with a positive reaction by commodities markets – particularly gold and copper.
The gold price hit $1,728.70 per troy ounce, down 7.54 per cent over one year, but up from its 2012 low of $1,594.20 on 8 May.
Copper, which is traditionally correlated to the gold price, reached a four-month high this week. Three-month copper on the London Metal Exchange traded at $8,080 a tonne against a close of $8,068 on Monday.
Performance of commodities over 1-yr
Source: FE Analytics
Last week, ETF Securities’ Scott Thompson said another round of quantitative easing in the US could be the catalyst for a 2009/2010 style rally for the precious metal.
Lyon’s five crown-rated Trojan fund is top quartile in its sector over three, five and 10 years. It has delivered 51.01 per cent over the five-year period, compared with 6.66 per cent from the IMA Flexible Investment sector.
The fund has also significantly outperformed the FTSE All Share index over each period.
Trojan is closed to new investors, but those who use platforms such as Hargreaves Landsdown or Bestinvest can still gain access with a minimum investment of £1,000.
Investors can still buy Troy’s £123.3m Income & Growth Trust, managed by Francis Brooke, or Lyon’s Personal Assets Trust.