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.'

Using this definition on our asset we see for example:- The total return, or increase in value over 5 years of Gold-Currency Strategy II is 30.9%, which is lower, thus worse compared to the benchmark GLD (56.4%) in the same period.
- During the last 3 years, the total return, or increase in value is 6.9%, which is smaller, thus worse than the value of 34% 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.'

Which means for our asset as example:- Looking at the compounded annual growth rate (CAGR) of 5.5% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (9.4%)
- Looking at annual return (CAGR) in of 2.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (10.3%).

'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.'

Applying this definition to our asset in some examples:- The volatility over 5 years of Gold-Currency Strategy II is 9.6%, which is smaller, thus better compared to the benchmark GLD (15.2%) in the same period.
- Looking at volatility in of 8.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (14.2%).

'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:- Compared with the benchmark GLD (10.8%) in the period of the last 5 years, the downside volatility of 7.2% of Gold-Currency Strategy II is lower, thus better.
- During the last 3 years, the downside volatility is 6.3%, which is lower, thus better than the value of 9.7% 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:- Compared with the benchmark GLD (0.45) in the period of the last 5 years, the Sharpe Ratio of 0.32 of Gold-Currency Strategy II is lower, thus worse.
- Looking at risk / return profile (Sharpe) in of -0.03 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.55).

'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:- Compared with the benchmark GLD (0.64) in the period of the last 5 years, the downside risk / excess return profile of 0.42 of Gold-Currency Strategy II is lower, thus worse.
- Compared with GLD (0.8) in the period of the last 3 years, the downside risk / excess return profile of -0.04 is lower, thus worse.

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Applying this definition to our asset in some examples:- The Ulcer Ratio over 5 years of Gold-Currency Strategy II is 7.22 , which is lower, thus better compared to the benchmark GLD (9.8 ) in the same period.
- Compared with GLD (8.26 ) in the period of the last 3 years, the Ulcer Ratio of 8 is smaller, thus better.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:- Looking at the maximum reduction from previous high of -13.8 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 (-22 days)
- Compared with GLD (-21 days) in the period of the last 3 years, the maximum DrawDown of -13.8 days is larger, thus better.

'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:- Compared with the benchmark GLD (897 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 590 days of Gold-Currency Strategy II is smaller, thus better.
- Compared with GLD (436 days) in the period of the last 3 years, the maximum days under water of 590 days is larger, thus worse.

'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.'

Which means for our asset as example:- Compared with the benchmark GLD (345 days) in the period of the last 5 years, the average time in days below previous high water mark of 214 days of Gold-Currency Strategy II is smaller, thus better.
- Compared with GLD (141 days) in the period of the last 3 years, the average days under water of 245 days is greater, thus worse.

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 and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.