Forecast-to-Fill: Benchmark-Neutral Alpha and Billion-Dollar Capacity in Gold Futures (2015-2025)

TL;DR

This paper demonstrates that simple trend and momentum signals can generate durable, benchmark-neutral alpha in gold futures, achieving high risk-adjusted returns with explicit risk, cost, and impact management over a decade.

Contribution

It introduces a forecast-to-fill approach linking transparent signals to executable trades, enabling scalable alpha in liquid assets like gold futures.

Findings

Sharpe ratio of 2.88 and max drawdown of 0.52%

43% annualized return and 37% alpha

Robust statistical significance confirmed by bootstrap and SPA tests

Abstract

We test whether simple, interpretable state variables-trend and momentum-can generate durable out-of-sample alpha in one of the world's most liquid assets, gold. Using a rolling 10-year training and 6-month testing walk-forward from 2015 to 2025 (2,793 trading days), we convert a smoothed trend-momentum regime signal into volatility-targeted, friction-aware positions through fractional, impact-adjusted Kelly sizing and ATR-based exits. Out of sample, the strategy delivers a Sharpe ratio of 2.88 and a maximum drawdown of 0.52 percent, net of 0.7 basis-point linear cost and a square-root impact term (gamma = 0.02). A regression on spot-gold returns yields a 43 percent annualized return (CAGR approximately 43 percent) and a 37 percent alpha (Sharpe = 2.88, IR = 2.09) at a 15 percent volatility target with beta approximately 0.03, confirming benchmark-neutral performance. Bootstrap confidence intervals ([2.49, 3.27]) and SPA tests (p = 0.000) confirm statistical significance and robustness to latency, reversal, and cost stress. We conclude that forecast-to-fill engineering-linking transparent signals to executable trades with explicit risk, cost, and impact control-can transform modest predictability into allocator-grade, billion-dollar-scalable alpha.