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:- Compared with the benchmark GLD (62.1%) in the period of the last 5 years, the total return, or increase in value of 27.8% of Gold-Currency Strategy II is lower, thus worse.
- Compared with GLD (42.4%) in the period of the last 3 years, the total return, or increase in value of 22% 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.'

Using this definition on our asset we see for example:- Looking at the annual performance (CAGR) of 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 (10.1%)
- During the last 3 years, the annual performance (CAGR) is 6.9%, which is smaller, thus worse than the value of 12.5% from the benchmark.

'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.'

Using this definition on our asset we see for example:- The volatility over 5 years of Gold-Currency Strategy II is 9.9%, which is lower, thus better compared to the benchmark GLD (13.9%) in the same period.
- Looking at volatility in of 10.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (13.7%).

'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:- Compared with the benchmark GLD (9.5%) in the period of the last 5 years, the downside deviation of 6.7% of Gold-Currency Strategy II is smaller, thus better.
- Compared with GLD (9.5%) in the period of the last 3 years, the downside risk of 7.2% is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Looking at the risk / return profile (Sharpe) of 0.25 in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (0.55)
- Looking at Sharpe Ratio in of 0.41 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.73).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:- Compared with the benchmark GLD (0.81) in the period of the last 5 years, the downside risk / excess return profile of 0.38 of Gold-Currency Strategy II is lower, thus worse.
- Compared with GLD (1.05) in the period of the last 3 years, the downside risk / excess return profile of 0.6 is smaller, thus worse.

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Applying this definition to our asset in some examples:- Compared with the benchmark GLD (7.02 ) in the period of the last 5 years, the Downside risk index of 4.06 of Gold-Currency Strategy II is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 2.95 , which is smaller, thus better than the value of 5.5 from the benchmark.

'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.'

Which means for our asset as example:- Looking at the maximum DrawDown of -12.5 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively larger, thus better in comparison to the benchmark GLD (-17.8 days)
- Compared with GLD (-13.8 days) in the period of the last 3 years, the maximum reduction from previous high of -12.5 days is greater, 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'

Using this definition on our asset we see for example:- The maximum time in days below previous high water mark 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 smaller, thus better than the value of 352 days from the benchmark.

'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 185 days, which is smaller, thus better compared to the benchmark GLD (241 days) in the same period.
- During the last 3 years, the average days below previous high is 87 days, which is lower, thus better than the value of 101 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.