Gold Funds are mutual funds which invests in stocks of companies engaged in gold mining & production . They do not buy gold directly but invests in stocks of companies engaged in gold mining and production world over.
When gold prices rise, the profitability of gold companies tends to increase more than proportionately, thereby providing long-term capital appreciation as stocks of gold companies have the potential to outperform gold prices by a significant margin over the long run.
Even they these are Gold funds , they can invest some part in Platinum and Silver.
According to the DSPML website, DSPML World Gold Fund has invested over 80 per cent in gold followed by platinum (9 per cent) and silver (5.10 per cent). As per the December 2007 portfolio, Australia based Newcrest Mining is the top holding of the fund accounting for 8.4 per cent of the fund’s assets, followed by Barrick Gold (7.50 per cent), Kinross Gold (5.50 per cent) and Lihir Gold (5.20 per cent).