Investment funds focused on gold and precious metals outperformed by a large margin during September, according to preliminary performance data released today by Morningstar Canada.

Equity funds that invest in natural resources, emerging markets and Japan also had strong one-month gains, as 22 of 31 Morningstar Canada Fund Indices were in positive territory during the month.

The precious metals fund Index surged 11.6% last month. Investors drove up prices of gold producers’ stocks, as hurricane damage on the U.S. Gulf Coast hampered global consumer confidence. The natural resource fund index was next best at 6.8%, as continuing high oil prices boosted returns.

Supply concerns continued to drive stocks of energy producers. “Although the price of crude oil retreated to US$66 a barrel toward the end of the month — after hurricane Rita did less damage than expected to Gulf Coast refineries — natural gas prices continued to rise ahead of the winter home-heating season,” said Morningstar Canada analyst Brian O’Neill, in a release.

The Japanese equity fund index also showed strength, gaining 6.5%. It was its second straight month of strong performance, more than doubling its return in August, when funds were propelled by the country’s rallying economy.

All Canadian equity categories fared well in September, once again fuelled by the energy sector. Canadian equity (pure) was the best among this group, gaining 3.3% for the month, followed by Canadian small cap equity and Canadian dividend, each at 2.6%.

September’s worst performing fund indices were foreign bond and high yield bond, which lost 2.9% and 1.6% respectively, thanks in large measure to the continuing strong Canadian dollar, which ended the month above US86¢.

On a year-to-date basis, natural resources was the top performer, gaining 41.5%. That was more than double the next best fund index, Canadian equity (pure), which rose 20.2% during the first nine months of 2005, also buoyed by resource-stock gains. The third best year-to-date performer was emerging markets equity, up 20.1%.