During the third quarter of 2013, the gold price recovered somewhat after the mayhem it experienced in quarter two. However, 1330 US$/oz. (up 11%) is still below the cost for most miners to dig the metal out of the ground.

By and large, the industry is loss making and all efforts are now targeted at cutting overhead costs, exploration expenditure, investment in projects and high-cost operations. Not surprisingly, the FTSE/JSE Gold Index continued to fall in spite of the metal price recovery. It declined by 0.4% during a quarter when other equities were particularly strong (FTSE/JSE All Share Index (ALSI) up 12.5%).

This fund's defensive positioning paid off during the third quarter as the return of +15% superseded that of the metal as well as both key indices (Gold and the ALSI). Year to date, the fund has massively outperformed its FTSE/JSE Gold Index benchmark, but that is no joy when it has in fact fallen by 25%.

The key concern, namely the fear that the gold price might have entered a bear market (after having risen for 10 consecutive years), is keeping supply and demand pretty tightly balanced at the moment. We will keep our eyes open for undervalued companies that would benefit if the metal recovers.

During the second quarter of 2013, the gold price continued its recent downward trend, falling to around US$1 200/oz, and having its worst quarter ever in US$ terms. On the back of this, investors continued to be negative towards gold equities and pushed the FTSE/JSE Gold Index down 33.5% in the quarter. Year to date the total return is now a staggering -45.4%.

The key concern is that the yellow metal, after having risen for 10 years from US$250/ oz to nearly US$1 800/oz, has not yet found a bottom. Investors are still selling in the paper markets, and physical purchases are not yet compensating for these sales. In this environment, the gold mining companies, who didn't provide much to their shareholders in terms of returns during these 10 fat years, are now looking poorly positioned to cope with lower prices.

The price of platinum also came under pressure during the quarter, as did fellow metals palladium and rhodium. On the back of that, the FTSE/JSE Platinum Mining Index fell 23.9%.

During the first quarter of 2013, the gold price continued its recent downward trend, falling to below 1 600 US$/oz. Investors became more negative towards gold equities and pushed the FTSE/JSE Gold Index down 18% in an environment where many of the financial and industrial shares were reaching new all-time highs.

Their key concern is that the yellow metal, after having risen for 10 years from 250 US$/oz to nearly 1 800 US$/oz, might now be in for some pause, if not a drop. And the gold mining companies, who have not really managed to provide much to their shareholders in terms of returns during these 10 fat years, are now looking poorly positioned to cope with lower prices.

The price of platinum, on the other hand, rose slightly during the quarter, as did fellow metals palladium and rhodium. However, the FTSE/JSE Platinum Mining Index took none of that, and suffered heavy losses (down 13.5% for the quarter) as the big constituents Implats and AngloPlats both reported very poor results.

Your fund did not escape the carnage and returned -8% during the quarter, which is hugely better than both the indices, but unfortunately it is negative.