Gold Investment

Gold Glossary

Arbitrage- Simultaneous buying and selling of gold in two separate markets in order to exploit price differentials.

Asked Price - Price at which gold is offered for sale.

Assay - To analyze and determine the fineness of gold.

Backwardation- A situation where spot gold price is higher than the gold futures price.

Bear An individual who perceives that the gold price will fall below the spot level in the future.

Bid Price - Price at which an individual is prepared to pay for buying gold.

Backwardation- A situation where spot gold price is higher than the gold futures price.

Bull An individual who perceives that the gold price will rise above the spot level in the future.

Bullion -Gold in non-fabricated form.

Bullion Coins -Gold coins minted in large quantities with low (3-5%) selling premium.

Buy at Best -To buy the required quantity of gold at prevailing market price.

Carat- Unit of the fineness of gold. For example, pure gold is 24 carats and 18 carat gold alloy contains 75% pure gold.

Closing Out-Action to close a long or short position.

Collateral -Gold pledged to secure a loan based on the spot price and margin arrangements between the parties concerned.

Commission House -An institution which buys and sells gold futures contracts for accounts of their customers.

Consignment - Gold delivered in advance by a supplier to an agent with the intention to facilitate and increase sales in an overseas market.

Contango - GA situation where spot gold price is lower than the gold futures price.

Deferred Settlement- Gold purchased or gold to be settled at a later date agreed between the buyer and seller.

Exchange for Physical (EFP)- A situation where the buyer of spot gold transfers to the seller an equivalent number of long gold futures contracts, or vice versa, at an agreed price.

Fineness- Percentage of pure gold in an alloy expressed as parts per thousand by weight.

Forward Contract- Contract for settlement of a gold deal at any date later than spot value date.

Forward Forward- Simultaneous purchase and sale of gold for different maturity dates in the forward market.

Gold Certificate- PDocument certifying the ownership of gold held at an authorized or recognized depository.

Gold Futures- Contracts for the purchase or sale of gold for future delivery on a gold futures exchange.

Gold Parity- Officially declared amount of gold to which the currency of a country is equivalent.

Good Delivery Bar- Gold bar which conforms to the specification given by the London Bullion Market Association (LBMA) which is internationally recognized.

Gross Weight-The actual weight of a gold bar or coin.

Hegde- Taking a position on a gold futures exchange or on the forward market against a deal concluded on the spot market to protect a profit position.

Hoarding- Accumulation of gold in anticipation of greater value in the future.

LBMA- London Bullion Market Association

Legal Tender- Gold coins which the central bank of a country declares to be acceptable for any payment at their face value.

Limit Order- Order placed by a customer with a specified limit on either price or time of execution, or both.

Liquidity- Depth of the market and its ability to absorb large buying or selling orders without wide price fluctuations.

London Fixing- Setting of the spot gold price which is held at 10:30 hours and 15:00 hours on each working day in the City of London by the five fixing members of the London Bullion Market Association (LBMA).

Margin- The amount of money or collateral deposited with a broker, bank or bullion house to insure against loss on an open position.

Margin Call- Call for extra deposit as maintenance margin when market moves against an open position held by the customer.

Market Maker- Banks, bullion houses or financial institutions making consistent two-way buy-sell prices for gold.

Medal- Small gold bar stamped or cast in the shape of a coin having no legal monetary value.

Moving Averages (MA)- A moving average is the arithmetic average of the closing gold prices for a specified number of days or weeks. In technical perspective, if the price has departed too far from the moving average, the market is considered to be ??overbought?ˉ or ??oversold?ˉ: retracement or slow down of the price is likely to occur until the average catches up.

One Cancel The Other Order (OCO)- TOrders placed by the customer to buy and to sell at specified prices. The sale order will be automatically cancelled when the buy order is filled and vice versa.

Open Interest- Total of all open positions on a futures exchange.

Put Option-Option giving buyer the right but not the obligation to sell gold at the stated striking price on or before the expiration date.

Relative Strength Indicator (RSI)- RSI measures the gold's technical strength relative to its own past performance. The RSI often stays within boundaries between 70 and 30, showing a less volatile price movement. Once the RSI stays above the upper boundary, the gold is considered to be 'overbought' while staying below the lower boundary is considered to be 'oversold'.

Short Sale-Sale of gold which the seller does not own in anticipation of a lower level of price in the future.

Stop Loss Order- Order placed by customer to buy or sell gold at the market if the specified price is reached.