When it comes to the nitty gritty of the technical terms that are involved in buying and selling precious metals, it can get complicated and confusing for those who new to the trade. In order to help you speak our language, we’ve pulled together a glossary of terms frequently used in the precious metals community.
A
ALLOCATED GOLD
Gold or silver that is physical bullion stored in a professional vault belonging to the owner. Allocated gold or silver bullion is the owner’s personal property, held under a custody (or ‘safekeeping’) arrangement.
ARBITRAGE
Simultaneous buying and selling a commodity in different markets to take advantage of price differentials.
ASK
The price at which a dealer offers to sell.
ASSAY
A test to determine the fineness and weight of a precious metal.
AUSTRIAN 100 CORONA
A restrike bullion gold coin containing .9802 ounce of gold.
AVOIRDUPOIS
A system of weights for commodities except precious metals, stones and drugs. One avoirdupois ounce equals 28.35 grams or 437.50 grains.
B
BACKWARDATION
The fee paid by a seller to the buyer for the grant to delay delivery of purchased securities. Opposite of CONTANGO MARKET. See INVERTED MARKET.
BAILMENT
Bailment refers to a legal relationship where physical possession of personal property, is transferred from one person (the ‘bailor’) to another person (the ‘bailee’). It occurs when a person gives property to someone else for safekeeping. Bailment is different from a contract of sale, as it only involves the transfer of possession and not its ownership.
BAR
A mass of metal cast or shaped into a convenient shape. In the precious metals industry, the words BAR and INGOT are used interchangeably.
BEAR
An analyst, trader or investor who thinks the price of a financial asset will fall. The term ‘bearish’ refers to this attitude of expecting a drop in market value. It also means a downward price trend or downtrend. Opposite of BULL.
BEAR MARKET
A market in which the primary trend is down.
BID
The price at which a dealer is willing to buy.
BU
Brilliant uncirculated, used to describe a coin in new condition.
BULL
An investor, trader or analyst who expects prices to rise. The term bullish also means a market uptrend. Opposite of BEAR.
BULL MARKET
A market in which the primary trend is up.
BULLION
Precious metals in the form of bars that are at least 99.5% pure.
BULLION COIN
A coin with a symbolic face value but trades at a price relative to its intrinsic value.
C
CALL
The right, but not obligation, to buy a commodity or a financial security on a specified date in the future.
CANADIAN MAPLE LEAFS
Modern gold, silver and platinum bullion coins minted by the Royal Canadian Mint.
CASH MARKET
A market in which delivery and payment have to be made within two working days of the transaction date. See SPOT MARKET.
CENTENARIO
Gold coin first issued in 1921 to celebrate the 100th anniversary of Mexico’s independence. See MEXICAN 50 PESO.
CHAIN OF INTEGRITY
Ensures the quality of the large bullion bars traded by wholesale dealers. Each buyer knows the identity of their seller because there is a history of ownership. The bullion bar’s quality (or ‘fineness’) is warranted, reducing transaction costs for wholesale traders. Through the chain of integrity, any problem can then be traced back to the refiner who created it, and any financial loss can be made good.
CHAMELEON
A broker or dealer who changes his position on an investment to what he thinks will cause an investor to enter into a transaction.
COIN
A stamped piece of metal of a known weight and fineness issued for commerce.
COIN OF THE REALM
A legal tender coin issued by a government and meant for general circulation.
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 (see NYMEX).
COMMEMORATIVES
Legal tender coins or medallions usually minted of gold or silver to commemorate themes, events, places or people.
COMMERCIAL TRADERS
A technical term from the US futures market. The ‘commercials’ in gold or silver are for companies who produce metal for sale, such as miners, refining companies or bullion banks. Because these companies are always at risk of falling gold or silver prices, they use futures contracts to ‘hedge’ their exposure by taking a short position which will profit if the price does drop.
COMMODITY EXCHANGE
An exchange where various commodities and derivatives products are traded. See FUTURES EXCHANGE.
COMMODITY POOL
A venture, usually a limited partnership, in which investors give funds for the purpose of buying commodities.
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.
CORRECTION
A decline in prices following a rise in a market.
COVER
To offset a short futures or options position.
D
DERIVATIVE
A financial instrument obtained from a cash market commodity, futures contract or other financial instrument. Derivatives can be traded on regulated exchanges or over-the-counter.
DOUBLE EAGLES
U.S. $20 gold coins used as legal tender from 1850-1933. Double Eagles contain .9675 ounce of gold and come in two designs: the St. Gaudens (Walking Liberty) and the Liberty.
DORÉ
A mix of unrefined gold and silver, produced at the mine to make shipping cheaper.
E
EXCHANGE TRADED FUNDS – ETFs
ETFs are a financial instrument traded on the stock market and designed to track the market price of another asset, such as a group of businesses, bonds or a specific commodity.
F
FACE VALUE
The legal monetary value stamped on a coin. See SYMBOLIC FACE VALUE.
FEDERAL RESERVE – THE FED
The Fed is a private organization that fulfils the standard central bank roles. Founded in 1913 to provide the United States with “an elastic currency” after what was known as the Bankers’ Panic of 1907. The Fed decides the country’s monetary policy, manages its reserve assets, clears checks and other bank-account transfers and acts as lender of last resort to troubled lenders and investment institutions.
FIAT MONEY
Paper money made legal tender by law, although not backed by gold or silver.
FIELD
The open area or background on a coin.
FINENESS
Measurement for investment gold. Near-pure 24-carat gold is equal to 995 parts per thousand, known as “995 fine” (also “0.995” and “two-nines-five”). The purity of a precious metal measured in 1,000 parts of an alloy: a gold bar of .995 fineness contains 995 parts gold and 5 parts of another metal. Example: the American Gold Eagle is .9167 fine, which means it is 91.67% gold. A Canadian Maple Leaf has a fineness of .999, meaning that it is 99.9% pure.
FINE WEIGHT
The metallic weight of a coin, ingot or bar, as opposed to the item’s gross weight which includes the weight of the alloying metal. Example: a 1-oz Gold Eagle has a fine weight of one troy ounce but a gross weight of 1.0909 troy ounce.
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 regulated by the commodities futures exchange procedures.
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.
FUTURES EXCHANGE (or MARKET)
A central financial exchange where people can trade futures contracts.
G
GOLD EAGLES
Modern gold bullion coins minted by the U.S. Mint since 1986. Gold Eagles come in four sizes: 1-oz, 1/2-oz, 1/4-oz and 1/10-oz.
GOLD STANDARD
A monetary system based on convertibility into gold.
GOLD FUTURES
A contract to trade a specific amount of gold at a set price decided now, but with a future settlement date.
GOLD INVESTOR INDEX
A monthly indicator of private sentiment towards physical gold bullion.
GOOD DELIVERY
The specification that a bar of precious metal must meet in order to be acceptable for delivery at a particular exchange.
GOOD DELIVERY BAR
A bar of gold or silver that is acceptable for delivery against a metals contract. Good Delivery bars are large – around 400 troy ounces each (12.4kg) for gold, and around 1,000 ounces for silver (31.1kg).
GRADING SERVICE
A company that grades numismatic coins. Generally, graded coins are encapsulated in plastic, a procedure called “slabbing.” PCGS and NGC are the two dominant grading services in the United States.
GRAIN
Earliest weight unit for gold. One troy ounce contains 480 grains.
GRAM
The basic unit of weight of the metric system. One troy ounce is equal to 31.1035 grams.
H
HALLMARK
Mark or stamp on a bullion item that identifies the producer.
HEDGE
A transaction formed with the specific intent of protecting an existing or anticipated physical market exposure from unexpected or unfavorable price changes.
HEDGING
When a company or an investor looks to reduce or eliminate their exposure to an asset they already own. The main use of hedging is by commercial businesses involved in the production of a raw material or product.
I
INFLATION
Characterized by widespread and continued price rises that reflect a loss of purchasing power in a currency. The classical economic definition of inflation is an increase in the money supply and available credit. Nowadays, though, inflation is most often used to mean higher prices. Because the word conveys two meanings, monetary inflation and price inflation are sometimes used for clarification.
INGOT
A mass of metal cast into a convenient shape. Used interchangeably with BAR.
INTRINSIC 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.
K
KARAT
A measure of the purity of a precious metal. Pure gold is 24 karat.
KILOBAR
A bar weighing one kilogram. The preferred bar size for gold investment in India and China.
KILOGRAM
1,000 grams, which is equal to 32.1507 troy ounces.
KOALA
Australian platinum coin (.995 fine) minted since 1987.
KRUGERRAND
South African gold coin.
L
LEGAL TENDER
Currency in specified denominations which a creditor is legally obligated to accept as payment of a debt.
LEGEND
The inscription on a coin.
LIQUIDITY
The quality of being readily convertible into cash.
LONDON FIX
Two daily bidding sessions in London of five major gold firms, at which the price of gold is “fixed” or set.
LONG
An investor or trader who owns an asset or holds a derivative contract which will profit from it rising in price. Owning physical gold makes you ‘long (of) gold’.
LUSTER
A frosty appearance on the surface of a coin, usually an uncirculated coin.
M
MARKET VALUE
The price at which a coin or bullion item trades.
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.
MEXICAN 50 PESO
Gold coin first issued in 1921 to celebrate the 100th anniversary of Mexico’s independence. The Mexican 50 Pesos in the bullion coin market normally are restrikes, minted from 1943 onward. See CENTENARIO.
METRIC TON
1,000 kilograms or 32,151 troy ounces.
MINT MARK
A letter or symbol stamped on a coin to identify the minting facility where it was struck.
MINT STATE
Describes a coin in uncirculated condition.
MODERN ISSUES
Current coins, whether struck for circulation or for sale to investors or collectors.
MS-60
The lowest grade of Mint State coins. Higher-grade coins are labeled MS-61 up to MS-70. Coins showing wear are graded below MS-60 and fall into grades from AU down to G, with G being a coin showing great wear and AU being a coin showing little wear.
N
NGC
Acronym for Numismatic Guaranty Corporation of America, one of two major coin grading services in the United States.
NOBLE
Modern platinum bullion coin issued by the Isle of Man since 1983.
NON-REPORTABLE
Small speculators don’t need to report their trading, unlike large speculators and commercial traders. Added together, these smaller positions make up what’s known as the ‘Non-Reportable’ category of traders in the weekly Commitment of Traders report.
NOTIONAL GOLD
Commonly used to refer to the options, futures and currency of gold because a very small amount of invested money can control a large position.
NUGGET
Modern gold bullion coin (.9999 fine) minted by Australia.
NUMISMATIC COINS
Coins whose prices depend more on their rarity, condition, dates and mint marks than on their gold or silver content.
NUMISMATIST
Coin collector.
NYMEX
The New York Mercantile Exchange, a future exchange where platinum and palladium are traded.
O
OBVERSE
The front side of a coin which contains the principal design.
OPTION
The right, but not obligation, to buy or sell a commodity or a financial security on a specified date in the future.
OUNCE
A unit of weight in which a troy ounce equals 31.1035 grams.
P
PAPER GOLD
Refers to investment products which are related to gold prices, but without the investor gaining physical ownership of any metal. Most typically, the phrase ‘paper gold’ means US gold futures and options contracts, which are effectively a bet on the price moving higher or lower.
PCGS
Acronym for Professional Coin Grading Service, one of two major coin grading services in the United States.
PENNYWEIGHT
An American unit of weight for gold in which one penny weight equals 24 grains or 1/20 of a troy ounce.
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.
PLANCHET
A blank piece of metal used for stamping a coin or medallion.
PLATINUM EAGLES
Modern platinum bullion coins minted by the U.S. Treasury.
PREMIUM
The dollar amount or percentage a coin sells over its intrinsic value.
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.
PUT
An option that gives the owner the right to sell a commodity or a financial security on a specified date in the future.
POSITION
The amount of money put into an asset by an investor. A ‘long position’ means you are invested for rising prices; a ‘short position’ means you are set to profit if prices fall. Investors increase or reduce their position when they change the quantity of an asset which they hold.
R
RALLY
A pronounced upward trend in an asset’s price. An advancing price movement following a decline in a market.
REPORTABLE
Large speculators using the US Comex market to trade gold or silver futures must report their positions to the Commodity Futures Trading Commission (CFTC) once a week. So must ‘commercial’ traders using the futures market to hedge their position.
RESISTANCE
Used in technical analysis of price charts to mean a price-point that looks likely to cap or pause any rise. Resistance is usually suggested by previous price-action, enabling an analyst to see where price rises halted in the past. Opposite of SUPPORT.
RESTRIKE
An official restrike is a genuine coin struck by the original Mint, but with a retrospective date. Officially issued reproduction of a former circulating coin.
REVERSE
The back of a coin.
ROUNDS
Short for 1-oz silver rounds, which are privately-minted
S
S&P 500
An important stock market index in the United States established in 1954 by Standard & Poor’s. The value of the index is based on the market capitalisation of 500 of the largest publicly-traded US companies, chosen to reflect the range of US business activity.
SHORT POSITION
Short selling or ‘shorting’ refers to the practice of selling an asset you don’t own, with the aim of buying it back at a lower price in future.
SHORT SALE
The sale of an asset for future delivery without possession of the asset sold.
SILVER EAGLES
Modern 1-oz silver bullion coins.
SILVER ROUNDS
1-oz .999 fine round pieces of silver about the sizes of silver dollars. Typically, silver rounds are privately minted.
SLABBED COINS
Coins encapsulated in plastic for protection against wear.
SOVEREIGN
English gold coin with a face value of one pound sterling and a gold content of .2354 ounce.
SPECULATIVE POSITION
A technical term from the US futures market. Speculative traders in Comex gold or silver futures are those players who aren’t part of the precious metals industry, and so aren’t looking to hedge an existing position. Instead, these ‘non-commercial’ traders are looking to profit by predicting the direction of prices, buying futures if they think prices will rise, or selling them if they expect prices to fall.
SPOT
The price for the physical delivery of bullion bars, usually 100-oz bars of gold or platinum and 1,000-oz bars of silver.
SPOT MARKET
A market in which delivery and payment have to be made within two working days of the transaction date. See CASH MARKET.
SPREAD
The difference between the buying price and the selling price of a precious metal coin or trading unit.
SYMBOLIC FACE VALUE
A number value given to legal tender coins sold for their metal content.
SUPPORT
From technical analysis of price charts, support means a price level below which an asset seems reluctant to fall, as suggested by previous action. Opposite of RESISTANCE.
T
TOLA
A unit of weight of India equal to 180 grains or 0.375 troy ounce.
TOLA BARS
Gold bars primarily traded in the Middle East, India, Pakistan, and Singapore. Measured in tolas, the most popular of which is the 10-tola cast bar (3.75 troy oz).
TROY OUNCE
The standard unit used for weighing and pricing precious metals. One troy ounce equals 31.1035 grams or 480 grains. One troy ounce equals 1.09711 avoirdupois ounce.
TROY POUND
Twelve troy ounces. Troy pound is an academic term and is rarely used.
TREASURY BOND
A fixed-income investment, sold by the US government to raise spending money. Also known as T-bonds. They are traded in the investment market, rising and falling in price to reflect interest rates, the outlook for inflation, so-called ‘safe haven’ demand when stock markets fall and also concerns over the amount of US debt in issue.
U
UNALLOCATED GOLD
A bookkeeping device by which a bank or other enterprise provides you with notional gold.
UNCIRCULATED
A coin in new condition, sometimes said to be “brilliant uncirculated” (see BU). Interchangeably used with MINT STATE.
W
WORLD GOLD COUNCIL
The market-development organization for the gold industry. Its 23 members comprise the world’s leading gold mining companies, representing approximately 60% of global corporate gold production. The World Gold Council’s purpose is to provide industry leadership, while stimulating and sustaining demand for gold.
Y
YIELD
A measure of the annual return on an investment expressed as a percentage.
