Switching rule
How to decide when to switch
The Gold-Bond Switch Portfolio compares gold with government bonds using a slow average. It is not a macro prediction, it is a behavior rule.
- Calculate the gold / bonds ratio: if the ratio rises, gold is doing better than bonds.
- Compare that ratio with a long moving average, for example 7 years, to avoid fast false signals.
- If the ratio stays above its average, the sleeve goes toward gold.
- If the ratio moves back below its average, the sleeve goes toward government bonds.
- Do not switch for one isolated crossing: the point of the rule is to be slow, clear and usable.
Understanding the 7-year moving average Beginner explanation
Imagine a slow trend line. One market month can move sharply and tell a misleading story. The 7-year moving average takes the last 84 months, averages them, then draws a calmer line.
It reduces noise. Instead of focusing only on the latest violent move, it helps read the broader direction.
Each month, the oldest month leaves the calculation and the newest month enters. The line therefore moves slowly with the market.
Because this is not meant to produce a fast buy/sell signal. The goal is to avoid changing your mind after every few-week shake.
On the gold / bonds chart, the blue line is not a prediction: it is a filter. If the ratio only moves briefly around that line, it does not say much. If it stays above for a long time, gold dominates bonds: the market may be looking more at inflation risk and weakening money. If it stays below for a long time, bonds regain control: the signal becomes more deflationary, or points to a colder world.