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In contrast, of the 10 short sale transactions, six were profitable resulting in an average annualized performance of 11.3 percent per year over a total investment period of seven years or 357 weeks. The long trades were more reliable than the short trades (14 of 18 or 78 percent profitable trades), and the overall performance is significantly better (35.1 percent per year for a total investment period of 11 years or 572 weeks). The combined return of long and short trading was 25.4 percent per year over 18 years or 929 weeks in the market with 71 percent of the trades (20 out of 28) making a profit.

The remainder of Table C provides some perspective as to the quality of the rules as compared to the potential of not trading gold. The overall performance of the trading rules over the entire study period was 7.2 percent per year. If you had simply bought gold in 1861 and still held it today, your performance would have been 2.2 percent per year. If you had never bought gold and always invested in the money market, your return would have been 4.9 percent per year. During the 18 years of long and short trades, the return for investing in the money market was 7.7 percent per year. Although there is an increase in risk with some losing trades, overall, trading gold with these rules increased the total return from 4.9 percent per year in commercial paper to 7.2 percent per year, while simply buying and holding gold would have only returned 2.2 percent per year. Furthermore, during the 18 years when gold was being traded, the combined return was 25.4 percent per year as opposed to a commercial paper return of only 7.7 percent over the same periods. When the price of gold has not been fixed, trading gold with these rules has far surpassed the returns expected from commercial paper.

Table D provides information to assess the quality of the trading rules as compared to the potential of perfect cycle timing. In total, there have been six rising phases (we have begun the seventh) of gold market cycles and five declining phases totaling 1,896 weeks or just over 36 years. Perfect timing would have yielded a 9.3 percent per year return on short trades, and 50.7 percent per year on long trades for a combined performance of 24.8 percent per year over 1886 weeks or 36 years. Combined with out-of-market periods, the total return with perfect cyclical timing would have been 9.5 percent per year, nearly double the return of only investing in the money market. In contrast, trading rules had a total performance of 7.2 percent per year. During the active trading periods, the rules earned 25.4 percent per year as opposed to 24.8 percent per year with perfect cyclical timing, but the trading rules w ere only invested for 929 weeks while perfect: cyclical timing would have earned a comparable return over 1,886 weeks.