Rolling-window tests for gold hedge slogans

A three-layer audit for protection slogans

Editorial framing: any protection slogan can be audited in three layers before it is treated as a settled hedge.

Score hit rates on rolling calendar windows, compare the candidate with inflation and a competing equity benchmark, and apply a currency-translation filter that asks whether an external dollar move changes domestic bills at all.

The archive facts below are the historical workflow. The three-layer reading is editorial.

Score hit rates on rolling calendar windows

Spot gold was tested from the 31 December 1974 close through 31 August 2006, a span of nearly 32 years of rolling calendar windows.

A rollingCalendarWindow is a fixed-length span that advances year by year so each completed interval becomes a separate hedge test.

Seasonality-analysis scores hedge slogans on repeating calendar-length windows of one, three, five, and ten years rather than on one start-to-end path.

The hedgeHitRate is the share of windows in which the candidate moved enough, and in the right direction, to offset the compared series.

Compare the candidate with inflation and equities

Intermarket-analysis compares gold with inflation, a dollar basket, and equities to judge whether one market offsets another across the same windows.

A purchasingPowerHedge test asks whether the candidate at least matches inflation so buying power is not eroded over the window.

Gold outpaced same-year inflation in 14 of 32 one-year windows (43.8%). Gold outpaced 10-year total inflation in 6 of 23 rolling 10-year windows (26.1%), so lengthening the window lowered rather than raised the inflation-beat frequency.

From a year-end 1974 close of 159.74 to a 31 August 2006 close of 623.50, gold finished just below the inflation-matched level of 650.

Gold outpaced the Dow Jones Industrial Average in 13 of 32 year-to-year windows (40.6%), the highest beat rate among the one-, three-, five-, and 10-year horizons tested.

A path that matched Dow total return from 1975 through 31 August 2006 would have implied gold at 2,950 versus the actual 623.50 close.

Editorial reading: the long-span equity gap is not the same claim as the year-to-year hedgeHitRate, so the audit keeps both measures.

Apply a currency-translation filter

Currency-translation reads gold against the external value of the dollar and separates that foreign-exchange move from household bills already priced in dollars.

The dollarBasketBarometer is a trade-weighted index of the dollar versus a group of major counterpart currencies, used here as the external-value benchmark.

After the US Dollar Index began in 1986, gold outpaced the five-year index change in 8 of 16 windows (50%), and no studied dollar horizon showed a higher hedge frequency.

From the 1986 dollar-index start to 31 August 2006, gold rose 69.3% (368.24 to 623.50) while the index fell 17.9% (103.59 to 85.02), even though shorter windows often showed gold moving with the dollar.

Ordinary household bills already priced in dollars were treated as largely unaffected by the dollar's external value, so a gold-versus-dollar comparison is a currency-translation question rather than a default domestic-cost hedge.

Editorial note: the filter asks whether an external dollar move changes domestic bills at all before a gold-versus-dollar slogan is counted as household protection.

Frequency and context, not one coincidence

Seasonality-analysis keeps the slogan on repeating calendar-length windows. Intermarket-analysis and currency-translation then decide which compared series a window is allowed to count.

Editorial lesson: a protection slogan that looks settled on one long path can still post a hedgeHitRate below half of the rollingCalendarWindow tests, or pass a dollar test that does not change a domestic bill.