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.'

Applying this definition to our asset in some examples:- Looking at the total return, or increase in value of 39.4% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (48.3%)
- Looking at total return, or performance in of 31.5% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to GLD (41.2%).

'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:- The annual performance (CAGR) over 5 years of Gold-Currency Strategy II is 6.9%, which is lower, thus worse compared to the benchmark GLD (8.2%) in the same period.
- During the last 3 years, the compounded annual growth rate (CAGR) is 9.6%, which is lower, thus worse than the value of 12.2% 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:- Compared with the benchmark GLD (13.4%) in the period of the last 5 years, the historical 30 days volatility of 10% of Gold-Currency Strategy II is lower, thus better.
- Looking at historical 30 days volatility in of 10.4% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (12.8%).

'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:- Looking at the downside deviation of 6.6% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (9.1%)
- During the last 3 years, the downside risk is 7.1%, which is lower, thus better than the value of 8.7% 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 0.44 in the last 5 years of Gold-Currency Strategy II, we see it is relatively higher, thus better in comparison to the benchmark GLD (0.42)
- Compared with GLD (0.76) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.68 is lower, thus worse.

'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:- Looking at the excess return divided by the downside deviation of 0.66 in the last 5 years of Gold-Currency Strategy II, we see it is relatively larger, thus better in comparison to the benchmark GLD (0.63)
- During the last 3 years, the excess return divided by the downside deviation is 1, which is lower, thus worse than the value of 1.12 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark GLD (7.02 ) in the period of the last 5 years, the Ulcer Index of 4.43 of Gold-Currency Strategy II is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 2.94 , which is lower, thus better than the value of 5.55 from the benchmark.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for 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 higher, thus better.
- During the last 3 years, the maximum reduction from previous high is -12.5 days, which is larger, 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.'

Which means for our asset as example:- The maximum days under water over 5 years of Gold-Currency Strategy II is 606 days, which is smaller, 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 299 days, which is lower, thus better than the value of 352 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 186 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 (239 days)
- During the last 3 years, the average time in days below previous high water mark is 86 days, which is lower, 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.