Investment funds that focus on gold and other precious metals had the best returns in August, according to preliminary data on investment-fund performance released today by Morningstar Canada.

The precious metals fund index gained 6.1% during the month, while two other indices representing sector-specific fund categories — science and technology and financial services — rounded out the top three performers.

Similar to July, August was mostly a positive month for the mutual fund industry, as 27 of the 31 Morningstar Canada fund Indices gained some ground.

“Precious metals funds surged on the last day of the month, moved by Goldcorp’s friendly $8.6 billion takeover of Glamis Gold,” said Morningstar Canada senior fund analyst Mark Chow, in a news release. “Precious metals funds slightly outperformed the S&P/TSX capped gold index while the price of gold actually fell somewhat during August.”

After spending the four previous months in negative territory, including three months near the bottom of the rankings, the science and technology fund index returned 4.1% in August, good enough for second place. The fund index’s year-to-date return was still in the red however, at -5.2%.

The third best-performing fund index in August was financial services, which gained 3.4% thanks to blowout quarterly earnings released by all of the big banks. Most notably, TD Bank’s share price rose by 11% during the month while Royal Bank’s rose 9%.

The performance of the financial services sector, the second largest in the S&P/TSX composite index, also benefited broadly diversified Canadian equity funds — particularly dividend funds, most of which have substantial exposure to financial stocks. Among the four domestic equity categories, the Canadian dividend fund index had the best performance with a 2.4% gain, followed by Canadian equity (pure) and Canadian equity with gains of 2.1% and 2% respectively. As was the case in July, the Canadian small cap equity fund index lagged its larger-cap counterparts but remained positive in August, gaining 0.8%.

South of the border, market performances were solid, as the S&P 500 benchmark of large-cap U.S. stocks gained 2.1%, while the smaller-cap Russell 2000 was up 2.8% (both figures expressed in U.S. dollars). Unfortunately for Canadian fund investors, the 2.3% drop of the greenback versus the loonie negated most of these gains. This translated into more subdued returns of 0.5% for the U.S. equity fund index and 0.2% for U.S. small and mid cap equity.

The European equity fund index continued to dominate the overseas equity categories with a 1.4% gain in August. The index sports the second-best return among all 31 fund indices for the year to date with 13.3%. Elsewhere, international equity gained 1% for the month, Global equity was up 0.8% and emerging markets equity climbed 0.7%.

The news wasn’t as good for Asian funds in August. A weakening yen hurt the returns of Japanese funds held by Canadians, and the Japanese equity fund index ended the month at the bottom of the ranking with a 0.7% loss.

“The Nikkei 225 rose more than 4% in August, but the yen fell by nearly 5%, cancelling any gains made by the index,” Chow said. “The Japanese market, after performing so well over the past few years, has hit some turbulence so far this year, but the country’s economy continues to show signs of a recovery.”

Elsewhere, the Asia ex-Japan equity fund index was down 0.1% while Asia/Pacific Rim equity managed to stay afloat with a 0.2% gain. These weak returns were also due in part to the fall of other Asian currencies against a strong Canadian dollar. The other losing indices for the month were natural resources (-0.7%) and foreign bond (-0.4%).

Final performance figures will be published at mid-month.