Data from FE Analytics shows that despite some volatility, the value of gold has risen 5.5 per cent since the start of the year.
Performance of index over 6-months
Source: FE Analytics
Keller says that pressure from high commodity prices has led to a rise in the operating costs for gold companies.
"One of the explanations seems to be focused on the strong appreciation in oil in recent months, which has prompted investors to focus more than ever on extraction costs," she explained.
"For example, RBC Capital Markets has published a very interesting study on the subject, which estimates that energy accounts for around 40 per cent of operating costs, labour another 40 per cent, and consumables the remaining 20 per cent. Consequently, higher oil prices are inflating operating costs."
Another factor is the shortage of qualified labour in the mining sector. According to Keller, this is the result of a long bear market at the end of the 20th century when training was neglected. She believes this will lead to salary hikes.
"As a result, operating costs will likely spiral upward, by around 15 to 20 per cent according to RBC," she explained. "This has not happened since 2008."
"Costs clearly vary considerably from company to company, but RBC estimates that in 2011, total costs will be less than or equal to $1,000 per ounce for about 80 per cent of gold produced."
Keller also emphasises that mining companies are being forced to search deeper and deeper underground or further into less accessible regions.
FE Analytics shows that so far this year the fund has lost investors 17 per cent, compared with a loss of 7 per cent from its Commodity and Energy sector average.
Performance of funds over 6-months
Source: FE Analytics
However, Keller says investors' concerns about the underperformance have been relieved by the steady rise in the price of gold.
"In view of the current price of gold, the profit margins of gold producers are still very comfortable, despite the strong correction in the commodities market in May," she said.
"It is worth noting that according to the London Bullion Market Association, the average expected price for 2011 is $1,457, while in 2010 the average price over the year was $1,225. These expectations correspond to an appreciation in the average price of gold of around 19 per cent in 2011."
Patrick Connolly of adviser AWD Chase de Vere says that investors should research very carefully before they invest in a gold equity fund.
"There has been a disconnect between the price of gold and gold mining shares," he explained. "The quality of the gold being extracted is less now than ever before and it is becoming harder to reach."
"The question for investors is whether the disconnect will be made up. Our view is that there is a bit of ground to be made up and it is wrong for investors to assume that the gold price and gold equity shares are directly correlated."