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 is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Which means for our asset as example:- Looking at the total return, or performance of 33.5% in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (42.6%)
- During the last 3 years, the total return, or performance is 24.8%, which is smaller, thus worse than the value of 34.7% from the benchmark.

'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:- The annual return (CAGR) over 5 years of Gold-Currency Strategy II is 5.9%, which is smaller, thus worse compared to the benchmark GLD (7.4%) in the same period.
- During the last 3 years, the annual return (CAGR) is 7.7%, which is lower, thus worse than the value of 10.5% from the benchmark.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Applying this definition to our asset in some examples:- Looking at the 30 days standard deviation of 9.9% in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus better in comparison to the benchmark GLD (13.4%)
- Compared with GLD (12.7%) in the period of the last 3 years, the volatility of 10.3% is lower, thus better.

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Using this definition on our asset we see for example:- Looking at the downside risk of 6.5% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (9%)
- During the last 3 years, the downside deviation is 7%, which is lower, thus better than the value of 8.6% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:- The risk / return profile (Sharpe) over 5 years of Gold-Currency Strategy II is 0.35, which is lower, thus worse compared to the benchmark GLD (0.36) in the same period.
- Compared with GLD (0.63) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.5 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.'

Applying this definition to our asset in some examples:- Looking at the ratio of annual return and downside deviation of 0.53 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (0.54)
- Compared with GLD (0.93) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.74 is lower, thus worse.

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Which means for our asset as example:- Compared with the benchmark GLD (7.21 ) in the period of the last 5 years, the Downside risk index of 4.45 of Gold-Currency Strategy II is lower, thus better.
- Looking at Downside risk index in of 3.09 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (5.61 ).

'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.'

Which means for our asset as example:- Compared with the benchmark GLD (-17.8 days) in the period of the last 5 years, the maximum DrawDown of -12.5 days of Gold-Currency Strategy II is larger, thus better.
- During the last 3 years, the maximum drop from peak to valley is -12.5 days, which is higher, thus better than the value of -13.8 days from the benchmark.

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Using this definition on our asset we see for example:- The maximum days under water over 5 years of Gold-Currency Strategy II is 606 days, which is lower, thus better compared to the benchmark GLD (741 days) in the same period.
- Compared with GLD (352 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 299 days is lower, thus better.

'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.'

Which means for our asset as example:- Looking at the average time in days below previous high water mark of 184 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (243 days)
- During the last 3 years, the average days below previous high is 87 days, which is lower, thus better than the value of 103 days from the benchmark.

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.