Gold vs Cash as a "safety" position

To say Gold performance in March has been disappointing would be an understatement.  I specifically label our Gold positions in the Tactical Volatility Strategy as "safety" for a reason.  So to see it not only not provide that safety it is meant to, but actually underperform the market itself, there's no way to sugar coat it, it's a gut kick.

For me as a tactical investor, a significant portion of my long-term outperformance comes from the two benefits of safety positions:

1)  During elevated Volatility, we can avoid the substantial drawdowns in the stock market during those periods

2)  Not only do they protect capital but they actually add long-term performance to the strategy

We can see that by isolating just the Gold positions in the strategy which occur on about 36% of trading days:

 The Tactical Volatility Strategy itself has returned about 27% a year and over 6% of that is coming from just our safety positions of Gold when the stock market itself is performing poorly. 

• The good news is that plus/minus of making money when the stock market is losing money is a huge performance boost long-term
• The bad news is that it does come at a cost in that drawdown periods do occasionally happen

Look closely at that chart above.  Back in the financial crisis there definitely would have been some disappointing months had we been trading it.  The strategy launched live in January 2012 and we can see in 2013/14 there was a really disappointing period, along with another one in 2022 when safety assets performed just as badly as the stock market. 

It appears we are in another one now in March 2026 where again, safety assets are performing just as bad  (if not worse)  than the stock market.  I don't want to sound too glib here and just say "it happens" but the reality is, it does actually happen...

Is Cash a solution?

This is the #1 question I get with respect to safety positions, and this question obviously comes up a lot when performance is bad.  If Gold is down so much for us, why not just hold Cash instead?

Honestly, Cash instead of an actual safety asset is a viable solution and it would definitely fix the recent problem of a big drawdown.  If you're holding Cash, you can't lose money right?

If you wanted, instead of Cash you could do something like the SHV or SGOV, or if you don't want any distributions then I would say BOXX is the best choice.  Interest rates aren't overly impressive these days but it may make a very small profit long-term:

• Again, there would be no drawdowns with Cash and the gut kick feeling with Gold the last week would obviously not be there.  You'd be sitting on the sidelines with 0% loss without a care in the world
• On the flip side, it would probably also feel like a big gut kick if you were in Cash during those periods where Gold is performing very well, and you'd be giving up about 6% annualized return long-term 

Welcome to investing  :)  You can't have all the good and none of the bad.  If we could, we'd all be mega millionaires right?  When we're holding an asset that's doing badly it feels terrible, but it also feels just as bad when you're not holding the asset class that's doing well.

Such is the life of a tactical investor...