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Glossary

Content

Arbitrage
Ask
Backwardation
Bear market
Bars ingots
Allocated Vs Unallocated
Bid
Bretton Woods Agreement
Bullion
Bull market
Carat or Karat
Call
Cash market
Coins
Coin of the realm
Comex
Commemoratives
Correction
Contango market
Cover
Cross rate
Derivative
ETF
Face value
Futures contract
Gold standard
Gold accounts
Good delivery
Good delivery bar
Grain
Gram
Hallmark
Hedge
Inflation
Kilo bar
Kilogram
Koala
Krugerrand
Legal tender
Liquidity
Market value
Medallion
Metric ton
Mint mark
Nugget
Numismatic coins
Numismatist
NYMEX
Option
Ounce
Physicals market
Planchet
Platinum Eagles
Premium
Proof
Put
Rally
Short sale
Silver Eagles
Sovereign
Spot market
Spot price
Spread
Symbolic face value
Example
Troy ounce
Yield
Arbitrage
simultaneously buying and selling a commodity in different markets to take advantage of price differentials.
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Ask
the price at which a dealer offers to sell.
Assay: a test to ascertain the fineness and weight of a precious metal.
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Backwardation
see Inverted market.
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Bear market
a market in which the primary trend is down.
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Bars ingots
The most traditional way of investing in gold is by buying bullion gold bars otherwise known as ingots. Gold bars can be held either directly (i.e. held directly by you or in your own safe) or indirectly (held in a vault on your behalf). Because of the many difficulties of transporting, storing and verifying pure gold bars, an increasingly popular method of investing in gold bars for the small investor is via allocated holdings using a gold account.
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Allocated Vs Unallocated
Other than storing gold in a safe deposit box at a bank or in one's home, gold can also be placed in allocated (also known as non-fungible), or unallocated (fungible or pooled) storage with a bank or dealer. In the case of the latter going bankrupt, the client will be unable to claim the gold and would become a general creditor, whereas gold held in allocated storage should be returned to the client in full.
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Bid
the price at which a dealer is willing to buy.
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Bretton Woods Agreement
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th Century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing financial strain, the system collapsed in 1971, after the United States unilaterally terminated convertibility of the dollars to gold. This action caused considerable financial stress in the world economy and created the unique situation whereby the United States dollar became the "reserve currency" for the states which had signed the agreement.
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Bullion
A term used to identify precious metals in bulk form, whereby bullion is values by its mass and purity as opposed to its face value (money).
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Bull market
a market in which the primary trend is up.
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Carat or Karat
A measure of purity by mass. 1ct. represents 1/24th purity, therefore fine gold is 99.9% gold or 24 carat, 18ct is 75% gold ,12ct is 50% gold. The carat system is being complimented or superseded by the millesimal fineness system where precious metals are denoted in parts per thousand.
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Call
the right, but not an obligation, to buy a commodity or a financial security on a specified date in the future.
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Cash market
see spot market.
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Coins
Among the most popular Bullion gold coins are the South African Krugerrand, the Canadian Gold Maple Leaf, the American Gold Eagle, the American Gold Buffalo, and the Australian Gold Nugget, all of which contain exactly one troy ounce of gold each. Other popular one ounce bullion coins include the Chinese Panda, and the Austrian Philharmonic. Gold coins which are used as bullion coins include the British gold sovereign and the Swiss Vreneli, but these are much lighter than one ounce. Coins incur an increased premium over bars or ingots in New Zealand
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Coin of the realm
a legal tender coin issued by a government, meant for general circulation.
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Comex
one of the world's major commodities futures exchanges where gold and silver are traded. The Comex is in New York City and is a division of the New York Mercantile Exchange.
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Commemoratives
legal tender coins or medallions usually minted of gold or silver to commemorate themes, events, places, or people.
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Correction
a decline in prices following a rise in a market.
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Contango market
a normal futures market in which prices are higher in the succeeding delivery months than in the nearest delivery month.  Opposite of backwardation.
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Cover
to offset a short futures or options position.
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Cross rate
is a currency pair that does not include USD, such as NZD/AUD. Pairs that involve the EUR are called euro crosses, such as EUR/GBP. All other currency pairs (those that don't involve USD or EUR) are generally referred to as cross rates.
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Derivative
a financial instrument derived from a cash market commodity, futures contract, or other financial instrument.  Derivatives can be traded on regulated exchanges or over-the-counter.  Futures contracts, for example, are derivatives of physicals commodities, and options on futures are derivatives of futures contracts.
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ETF
Gold exchange-traded funds (or GETFs) are traded like shares on the major stock exchanges including London, New York and Sydney. There are a number of different gold ETF (some trade better than others, originally one ETF, represented exactly one-tenth of an ounce of gold. Due to costs, the amount of gold in each certificate is now slightly less. They are fully backed by gold which is both deposited and insured. The inventory of gold is managed by buying and selling gold on the open market Gold ETFs represent an easy way to gain exposure to the gold price, without the inconvenience of storing physical bars. Typically a small commission is charged for trading in gold ETFs and a small annual storage fee is charged. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time.
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Face value
the legal monetary value stamped on a coin. See symbolic face value.
Forward transaction: purchase or sale for delivery and payment at an agreed date in the future; similar to a futures contract, except that forward transactions are not subject to the standardized procedures and regulations of a commodities futures exchange.
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Futures contract
an agreement made on an organized exchange to take or make delivery of a specific commodity or financial instrument at a set date in the future.
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Gold standard
a monetary system based on convertibility into gold; paper money backed and interchangeable with gold.
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Gold accounts
are typically backed through unallocated or allocated gold storage. Different accounts impose varying levels of intermediation between the client and their gold, for example through bailment or within a trust. Bailment is the legal action of a client entrusting their physical property to another party for safekeeping, and paying for the service.
Gold Investment: Investment in gold can be done directly through ownership, or indirectly through certificates, accounts, spread betting, derivatives or shares
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Good delivery
the specification that a bar of precious metal must meet in order to be acceptable for delivery at a particular exchange.
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Good delivery bar
a bar of gold or silver that is acceptable for delivery against a metals contract.
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Grain
earliest weight unit for gold. One troy ounce contains 480 grains.
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Gram
the basic unit of weight of the metric system. (31.1035 grams = one troy ounce.)
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Hallmark
A hallmark is an official mark or series of marks struck on items made of precious metals — platinum, gold, silver and in some nations, palladium. In a more general sense, the term hallmark can also be used refer to any distinguishing characteristic or trait. Historically, hallmarks were applied by a trusted party: the 'guardians of the craft' or nowadays by an assay office. Hallmarks are a guarantee of certain purity or fineness of the metal as determined by formal metal (assay) testing.
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Hedge
a transaction initiated with the specific intent of protecting an existing or anticipated physical market exposure from unexpected or adverse price fluctuations.
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Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also a decline in the real value of money—a loss of purchasing power in the internal medium of exchange and unit of account in the economy. A chief measure of general price-level inflation is the general inflation rate, which is the percentage change in a general price index (normally the Consumer Price Index) over time. Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growthIntrinsic value: the value of a coin's metal content.
Inverted market: a situation in which prices for future deliveries are lower than the spot price. Also known as backwardation.
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Kilo bar
a bar weighing one kilogram (32.1507 troy ounces).
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Kilogram
1,000 grams (32.1507 troy ounces).
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Koala
Australian platinum coin, minted since 1987,.995 fine.
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Krugerrand
South African gold coin.
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Legal tender
currency in specified denominations which a creditor is compelled by law to accept as payment of a debt.
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Liquidity
the quality of being readily convertible into cash.
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Market value
the price at which a coin or bullion item trades.
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Medallion
a round piece of metal resembling a coin but not a "coin of the realm." A medallion may be issued by a government or private mint. The Engelhard 1-oz silver prospector is a privately-minted medallion.
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Metric ton
1,000 kilograms or 32,151 troy ounces.
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Mint mark
a letter or symbol stamped on a coin to identify the minting facility where it was struck
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Nugget
modern gold bullion coin minted by Australia, .9999 fine.
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Numismatic coins
coins whose prices depend more on their rarity, condition, dates, and mint marks than on their gold or silver content.
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Numismatist
coin collector.
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NYMEX
the New York Mercantile Exchange, a future exchange where platinum and palladium are traded.
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Option
the right, but not an obligation, to buy or sell a commodity or a financial security on a specified date in the future.
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Ounce
a unit of weight. In the precious metals industry, an ounce means a troy ounce equal to 31.1035 grams.
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Physicals market
a marketplace in which the physical product is traded, as opposed to a futures market where "contracts" are traded and physical delivery of the product may or may not take place.
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Planchet
a blank piece of metal used for stamping a coin or medallion.
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Platinum Eagles
modern platinum bullion coins minted by the U.S. Treasury.
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Premium
the dollar amount or percentage a coin sells over its intrinsic value. Example: the American Eagle sells at a premium of 5% to 8%.
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Proof
a coin produced using special dies and planchets that results in a sharpness of detail and a virtually flawless surface, usually mirror-like fields. Proof coins are produced for the collector market.
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Put
an option that gives the owner the right to sell a commodity or a financial security on a specified date in the future.
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Rally
an advancing price movement following a decline in a market
Ratio gold/silver: Silver often tracks the gold price due to store of value demands, although the ratio can vary. The gold/silver ratio is often analyzed by traders and investors and buyers. In 1792, the gold/silver ratio was fixed by law in the United States at 1:15, which meant that one troy ounce of gold would buy 15 troy ounces of silver; a ratio of 1:15.5 was enacted in France in 1803. The average gold/silver ratio during the 20th century, however, was 1:47.
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Short sale
the sale of an asset for future delivery without possession of the asset sold.
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Silver Eagles
modern 1-oz silver bullion coins.
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Sovereign
English gold coin with a face value of one pound sterling and a gold content of .2354 ounce.
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Spot market
a market in which delivery and payment have to be made within two working days of the transaction date.
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Spot price
is the price that is quoted for immediate (spot) settlement (payment and delivery). Spot settlement is normally one or two business days from trade date. This is in contrast with the forward price established in a forward contract or futures contract, where contract terms (price) are set now, but delivery and payment will occur at a future date. For securities, the synonymous term cash price is more often used.
Depending on the item being traded, spot prices can indicate market expectations of future price movements in different ways. For a security or non-perishable commodity (e.g., gold), the spot price reflects market expectations of future price movements. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security, according to the cost of carry model. For example, on a share the difference in price between the spot and forward is usually accounted for almost entirely by any dividends payable in the period minus the interest payable on the purchase price. Any other price would yield an arbitrage opportunity and riskless profit (see rational pricing for the arbitrage mechanics).
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Spread
the difference between the buying price and the selling price of a precious metal coin or trading unit.
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Symbolic face value
nominal value given to legal tender coins sold for their metal content.
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Example
the 1-oz Gold Eagle carries a $50 face value but sells for the value of its gold content plus a premium of 5% to 8%.
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Troy ounce
is a unit of measure and is traditionally used in pricing precious metals. The "troy ounce" is derived from the Roman monetary system. The Romans used bronze bars of varying weights as currency. An "Aes Grave" weighed in at 1 pound. 1/12th of an Aes Grave was called an uncia, in English "ounce". Later standardizations would change the ounce to 1/16th of a pound, but the 1/12th pound ounce is still used for measuring precious metals. A troy ounce is equivalent to 31.1035 grams, and there are 32.15 troy ounces to the kilo.
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Yield
a measure of the annual return on an investment expressed as a percentage.
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