Value Separation

What Is Value Separation?

Value Separation splits gold's price into two parts: a stable component and a volatile component. Think of it as separating the long-term trend from short-term price swings.

• Stable Value (sValue): Based on smoothed price averages over months

• Volatile Value (vValue): Everything else - the daily ups and downs

• The math is simple: Stable + Volatile = Total Gold Price

How We Calculate Stable Value

The Gold Stability Valuation Mechanism (GSVM) uses a weighted formula:

Core Algorithm:

sValue = α × EMA120 + (1-α) × [β × EMA90 + (1-β) × SpotPrice]

Where:

• α = 0.8 (weight for 120-day average, governance adjustable)

• β = 0.7 (weight for 90-day average, governance adjustable)

• EMA120: 120-day exponential moving average

• EMA90: 90-day exponential moving average

• SpotPrice: Current oracle-supplied market price

With default parameters, this simplifies to:

Stable Value = 80% × EMA120 + 20% × [70% × EMA90 + 30% × current price]

This gives us a price that moves with long-term trends but ignores short-term noise. The 120-day average does most of the work, while recent prices keep it from getting too stale.

Dynamic Adjustments

The system adjusts its calculations based on how volatile gold is being:

When markets are calm:

• Uses less of the long-term average (down to 65%)

• Allows more sensitivity to current prices

When markets are chaotic:

• Relies more heavily on long-term averages (up to 95%)

• Filters out more of the noise

The system measures volatility using a 30-day rolling standard deviation, then compares it to the past 6 months to decide what's "normal."

Changes happen gradually - maximum 1.5% per day - so the system doesn't overreact to temporary spikes.

Creating the Volatile Component

Once we have the stable value, the volatile part is just subtraction:

Volatile Value = Current Gold Price - Stable Value

This creates natural leverage for the volatile component. When gold trades close to its stable value, the volatile part gets highly leveraged. When there's a big gap, leverage decreases.

The leverage ratio is always: Gold Price ÷ Volatile Value

Price Feeds and Security

We pull gold prices from multiple sources and run several checks:

• Multiple oracles - no single point of failure

• Outlier detection - automatically throws out suspicious data points

• Consistency checks - makes sure prices make sense over time

• Weighted recent data - newer prices matter more, but not too much

This makes it much harder for someone to manipulate the system by attacking a single price feed.

Why This Works

Cleaner separation: Using multiple timeframes gives us better trend identification than simple moving averages.

Self-adjusting: The system gets more conservative when markets are volatile and more responsive when they're stable.

Hard to game: Multiple validation layers and gradual adjustments make manipulation expensive and ineffective.

Gas efficient: Smart batching and optimized calculations keep costs reasonable.

Community controlled: Key parameters can be adjusted through governance while keeping the core system secure.

The math is straightforward, the execution is robust, and the results give you two distinct risk profiles from the same underlying asset.