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.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:- The total return, or performance over 5 years of Gold-Currency Strategy II is 30.5%, which is lower, thus worse compared to the benchmark GLD (63.8%) in the same period.
- Compared with GLD (37.2%) in the period of the last 3 years, the total return, or increase in value of 17.4% is lower, thus worse.

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Which means for our asset as example:- Compared with the benchmark GLD (10.4%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 5.5% of Gold-Currency Strategy II is smaller, thus worse.
- Looking at compounded annual growth rate (CAGR) in of 5.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (11.1%).

'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.'

Which means for our asset as example:- Looking at the 30 days standard deviation of 10.3% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (14%)
- During the last 3 years, the 30 days standard deviation is 11.2%, which is lower, thus better than the value of 14.1% 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.'

Applying this definition to our asset in some examples:- The downside risk over 5 years of Gold-Currency Strategy II is 7.1%, which is lower, thus better compared to the benchmark GLD (9.7%) in the same period.
- During the last 3 years, the downside deviation is 8%, which is lower, thus better than the value of 10% from the benchmark.

'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:- Looking at the ratio of return and volatility (Sharpe) of 0.29 in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (0.56)
- During the last 3 years, the risk / return profile (Sharpe) is 0.27, which is lower, thus worse than the value of 0.61 from the benchmark.

'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:- The downside risk / excess return profile over 5 years of Gold-Currency Strategy II is 0.42, which is lower, thus worse compared to the benchmark GLD (0.81) in the same period.
- Looking at downside risk / excess return profile in of 0.37 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.86).

'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 (6.93 ) in the period of the last 5 years, the Downside risk index of 3.63 of Gold-Currency Strategy II is smaller, thus better.
- During the last 3 years, the Ulcer Ratio is 2.62 , which is smaller, thus better than the value of 5.85 from the benchmark.

'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:- Looking at the maximum drop from peak to valley of -12.5 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively higher, thus better in comparison to the benchmark GLD (-17.8 days)
- During the last 3 years, the maximum DrawDown is -12.5 days, which is larger, thus better than the value of -13.8 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 lower, thus better in comparison to the benchmark GLD (741 days)
- Looking at maximum days under water in of 203 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (352 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:- Compared with the benchmark GLD (242 days) in the period of the last 5 years, the average time in days below previous high water mark of 179 days of Gold-Currency Strategy II is lower, thus better.
- During the last 3 years, the average days under water is 54 days, which is smaller, thus better than the value of 102 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.