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 29.3%, which is lower, thus worse compared to the benchmark GLD (32%) in the same period.
- Compared with GLD (26.9%) in the period of the last 3 years, the total return, or increase in value of 16.8% is lower, thus worse.

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- Looking at the annual return (CAGR) of 5.3% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (5.7%)
- During the last 3 years, the annual return (CAGR) is 5.3%, which is lower, thus worse than the value of 8.3% 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.'

Using this definition on our asset we see for example:- The 30 days standard deviation over 5 years of Gold-Currency Strategy II is 10.5%, which is lower, thus better compared to the benchmark GLD (13.8%) in the same period.
- During the last 3 years, the historical 30 days volatility is 11.7%, which is lower, thus better than the value of 14.7% from the benchmark.

'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:- The downside deviation over 5 years of Gold-Currency Strategy II is 7.3%, which is smaller, thus better compared to the benchmark GLD (9.8%) in the same period.
- Looking at downside risk in of 8.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (10.5%).

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Which means for our asset as example:- The ratio of return and volatility (Sharpe) over 5 years of Gold-Currency Strategy II is 0.26, which is greater, thus better compared to the benchmark GLD (0.23) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.24, which is lower, thus worse than the value of 0.39 from the benchmark.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:- Compared with the benchmark GLD (0.33) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.38 of Gold-Currency Strategy II is greater, thus better.
- Looking at downside risk / excess return profile in of 0.33 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.55).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark GLD (7.41 ) in the period of the last 5 years, the Ulcer Ratio of 3.82 of Gold-Currency Strategy II is lower, thus better.
- Compared with GLD (6.59 ) in the period of the last 3 years, the Downside risk index of 3.09 is lower, thus better.

'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:- Compared with the benchmark GLD (-18 days) in the period of the last 5 years, the maximum reduction from previous high of -12.5 days of Gold-Currency Strategy II is higher, thus better.
- During the last 3 years, the maximum reduction from previous high is -12.5 days, which is higher, thus better than the value of -18 days from the benchmark.

'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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Applying this definition to our asset in some examples:- Looking at the maximum time in days below previous high water mark of 606 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 (741 days)
- Looking at maximum days below previous high in of 177 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (310 days).

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. 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.'

Using this definition on our asset we see for example:- The average days under water over 5 years of Gold-Currency Strategy II is 182 days, which is smaller, thus better compared to the benchmark GLD (245 days) in the same period.
- During the last 3 years, the average days below previous high is 54 days, which is lower, thus better than the value of 92 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.