The Gold-Currency Strategy II takes advantage of the historically negative correlation between gold and the U.S. dollar. It switches between the two assets based on their recent risk adjusted performance enabling the strategy to provide protection against severe gold corrections due to dollar strength. It is an excellent addition to existing equity or bond portfolios as it holds very little correlation to either.

This strategy is an update to the original GLD-USD strategy that uses inverse leveraged ETFs which are not permitted in some retirement accounts.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:- The total return, or performance over 5 years of Gold-Currency Strategy II is 29%, which is lower, thus worse compared to the benchmark GLD (37.9%) in the same period.
- Looking at total return in of 17% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to GLD (29.2%).

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:- Compared with the benchmark GLD (6.6%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 5.2% of Gold-Currency Strategy II is smaller, thus worse.
- Compared with GLD (8.9%) in the period of the last 3 years, the annual return (CAGR) of 5.4% is lower, thus worse.

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Using this definition on our asset we see for example:- Looking at the historical 30 days volatility of 10.6% in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus better in comparison to the benchmark GLD (13.7%)
- Compared with GLD (14.7%) in the period of the last 3 years, the historical 30 days volatility of 11.8% is smaller, thus better.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- Compared with the benchmark GLD (9.7%) in the period of the last 5 years, the downside volatility of 7.3% of Gold-Currency Strategy II is lower, thus better.
- During the last 3 years, the downside volatility is 8.4%, which is lower, thus better than the value of 10.5% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:- Looking at the ratio of return and volatility (Sharpe) of 0.26 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (0.3)
- Compared with GLD (0.43) in the period of the last 3 years, the Sharpe Ratio of 0.24 is smaller, thus worse.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:- Looking at the ratio of annual return and downside deviation of 0.37 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (0.43)
- During the last 3 years, the excess return divided by the downside deviation is 0.34, which is lower, thus worse than the value of 0.61 from the benchmark.

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:- Looking at the Downside risk index of 4.03 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (7.74 )
- Looking at Ulcer Index in of 3.44 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (7.17 ).

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Applying this definition to our asset in some examples:- The maximum drop from peak to valley over 5 years of Gold-Currency Strategy II is -12.5 days, which is greater, thus better compared to the benchmark GLD (-18.8 days) in the same period.
- Looking at maximum DrawDown in of -12.5 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to GLD (-18.8 days).

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs) in days.'

Using this definition on our asset we see for example:- The maximum days under water over 5 years of Gold-Currency Strategy II is 605 days, which is lower, thus better compared to the benchmark GLD (741 days) in the same period.
- During the last 3 years, the maximum days below previous high is 151 days, which is lower, thus better than the value of 299 days from the benchmark.

'The Average Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Applying this definition to our asset in some examples:- Looking at the average days under water of 184 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus better in comparison to the benchmark GLD (248 days)
- Looking at average days under water in of 51 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (92 days).

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Gold-Currency Strategy II are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.