Both gold and mutual funds are good investment. First, the ways to invest in Gold. You can buy gold based mutual funds which track gold prices and the value goes up and down depending on the price of gold. Moreover, the advantage is that it is in demat form so you don't have to worry about its safety. Almost all mutual funds offer gold based funds. Some of them are Birla sunlife Gold fund, HDFC gold scheme etc. Reliance and DSP black rock are other fund houses. You can also buy Gold ETF which are very similar to gold funds.
The other investment is mutual funds. There are three types of mutual funds in general. Equity mutual funds invest their major part in equities and hence they provide better return in the longer term. However, the value of equity mutual funds fluctuates widely in short term. Typically equity mutual funds provide a return of 12% to 18% CAGR over longer time.
The other fund is balanced fund which invest a part in equity and a part in debt. This means, there will be lower risk than the equity mutual funds but the prospect of returns is also low. Balanced funds, in general, provide a return of 8% to 15%.
Debt funds invest in debts and are the least risky. However the returns are low (6% to 10%). As far as yield is concerned, you have to first see what time horizon you are looking for. On the longer term, equity mutual funds will beat gold fund.