Market Commentary

Gold Price & Investment Update

April 2013

"The desire of gold is not for gold. It is for the means of freedom and benefit." – Ralph Waldo Emerson

We write with a general update on the gold and gold-related holdings in your portfolios. Gold has been in the headlines lately and you may have noticed news related to a drop in gold's price.

Your gold and gold-related investments have been part of a decision made for many years by your fund managers and by us to hold a modest allocation to this unusual asset. Across portfolios, clients have generally held in the range of around 5-9% gold and gold-related investments during this entire market cycle. Your holdings in gold are meant to serve as a permanent store of value, in particular when times are difficult in the broader markets and in the economy. In many kinds of troubled scenarios, gold can serve as effective ballast in your portfolio, which we definitely saw during the volatile period of 2007-2009 and through the first phase of the market's recovery through 2011.

More recently, gold and gold-related stocks have come down in price, and this has impacted your portfolio holdings to the downside. Your portfolios are still positive year-to-date, but there's no question that gold has cost us some short-term performance. It is never fun to watch the value of any investment go down, and it can be stressful. In this instance the machinations around speculation and trading in gold have been quite eye-popping, and thus headline-grabbing. After careful consideration, we continue to think that your gold and gold-oriented investments should stay in your diversified portfolios at these lower prices.

The fundamental reasons for owning this allocation haven't changed: we are in a world that is cheapening currencies on many continents at every turn; we are back in a heavy risk-taking environment; trust in government and the social fabric is frayed; the volume of investment activity can and we think will lead to potentially extraordinary volatility and, surely, heightened risk as we move into what we think is a more speculative phase in the market. Of all the assets you are invested in, only one has a truly long term track record as a store of value: gold. We think it continues to make sense to hold an allocation of between 5-10% of gold and gold-related investments across your portfolios.

We will watch and wait for the situation to settle some, as gold may test further technical barriers to the downside. We would not be averse to possibly establishing slightly larger positions for you at these or lower prices, and will consider that decision carefully on an ongoing basis.

This is a general assessment of client portfolios and does not reflect the specific circumstance of every client.

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