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ACID TEST: A means of determining the fineness of gold through the use of nitric acid and aqua regia.

ACTUAL GOLD CONTENT: The amount of pure gold that exists in an object when all other metals have been extracted.

AG: The chemical symbol for silver.

ALLOCATED: This term refers to the practice in which the client’s metal is individually identified as his, and physically segregated from all the other gold in the vault. It is the storing specific precious metal products in a segregated account for the exclusive benefit of a particular accountholder. Allocated goods are safe from the insolvency of financial institutions, carrying no counter-party risk. Within gold investment there is a huge difference between allocated and unallocated gold. When you invest in gold you typically want to own a tangible asset that is outside of the leveraged financial system and free from counterparty risk.

ALLOY: A mixture of two or more metals. Metals such as Silver, nickel, copper and zinc are frequently mixed with gold to improve its hardness and durability, making it more resistant to nicks and scratches.

ALTERNATIVE ASSETS: Any non-traditional asset with potential economic value that would not be found in a standard investment portfolio. The main advantage of alternative assets is that they help diversify an investor’s portfolio. Since they are non-traditional investments, they do not tend to move in the direction of the stock market and may, therefore, help a portfolio sustain market volatility. Also, due to lower liquidity, alternative assets are often mispriced and so offer opportunities for arbitrage.

AMERICAN EAGLE (GOLD OR SILVER): Bullion products struck by the U.S. Mint. Since their debut in 1986, these coins have become America’s most popular bullion coins, as well as being instantly recognizable and accepted worldwide. Although these coins have legal tender status, the intrinsic bullion value far exceeds the face value of these coins. American Gold Eagles are struck in a traditional coinage alloy of 91.7 percent pure Gold (22 karat); each coin contains a full measure of pure Gold, alloyed with Silver and copper. American Gold Eagles are available in 1 oz ($50 face value), 1/2 oz ($25 face value), 1/4 oz ($10 face value) and 1/10 oz ($5 face value) sizes. American Silver Eagles are the official Silver bullion coin of the United States. These 1 troy oz Silver bullion coins each bear a nominal $1 face value, and each is struck in .999 fine Silver. Both the American Gold Eagle and American Silver Eagle bullion coins are guaranteed by the United States government to have the correct weight and purity.

AMERICAN OPTION: An option contract that may be exercised on any day up to and including the expiry date.

ARBITRAGE: Simultaneously buying and selling a commodity in different markets to take advantage of price and/or premium differentials.

ARGENTUM: Latin for silver.

ASK: The price at which a dealer offers to sell.

ASSAY: A test to ascertain the fineness and weight of a precious metal.For gold and silver bullion to be accepted by the professional markets the assay results must verify a minimum acceptable fineness set by the London Bullion Market Association (LBMA). Bullion that meets LBMA standards is said to be ‘Good Delivery’. When you invest in gold or silver using your Clear Title Account, you are buying good delivery bullion. Investing in good delivery bullion is important, since it means that when you sell, you are selling a guaranteed quality of gold or silver, and therefore achieve a higher price.

AU: The chemical symbol for Gold, which is derived from “aurum”, the Latin word for Gold.

AURUM: The word for gold in Latin.

AUSTRALIAN KANGAROO: Australia’s Gold Nugget bullion coins (now Kangaroos) were introduced in 1986 as.9999 fine (“four nines,” or 99.99 percent pure Gold) bullion coins. Each year since 1989, the design has been changed, all featuring various depictions of kangaroos. Coins are shipped individually encapsulated in a square plastic case.

AUSTRALIAN KOALA: Australian bullion coin which has been minted since 1987. The Koala has been minted in Gold, Silver and Platinum, and its design changes each year.

AUSTRIAN 100 CORONA: Late 20th century restrike of a popular 19th century bullion Gold coin. Each coin contains .9802 oz actual Gold weight.

AUSTRIAN PHILHARMONIC (GOLD OR SILVER): Austria’s .9999 Gold Philharmonic bullion coins were first minted in 1989 and quickly became Europe’s most popular Gold bullion coin. Silver Philharmonic coins were first issued in 2008 and are .999 fine Silver. On the obverse is the Great Organ in Vienna’s Concert Hall. The reverse depicts a harmonious design of musical instruments from the Austrian Philharmonic Orchestra.

AUSTRIAN ECONOMICS: An economic school of thought that originated in Vienna during the late 19th century with the works of Carl Menger. The Austrian school holds a special view of the modern business cycle; it contends that boom cycles are actually a misallocation of capital resources caused by interfering monetary policy. When central banks effectively expand the money supply by lowering interest rates, it creates an multiplying effect in the economy. This leads business owners to incorrectly assess the amount of available capital and the level of demand by consumers. Eventually, overinvestment by corporations leads to a “bust” cycle in which prior misallocations must be worked out.

Carl Menger, who wrote “Principles of Economics” in 1871, is considered by many to be the founder of the Austrian School. The title of Menger’s book suggests nothing extraordinary, but its contents became one of the pillars of marginalist revolution. Menger explained in his book that the economic values of goods and services are subjective in nature. That is: what is valuable for you may not be valuable for your neighbor. Menger further explained that with an increase in the number of goods, their subjective value for an individual diminishes. This valuable insight lies behind the concept of what is called diminishing marginal utility.

Later on, Ludwig von Mises, another great thinker of the Austrian School, applied the theory of marginal utility to money in his book “Theory of Money and Credit” (1912). The theory of diminishing marginal utility of money may in fact help us in finding an answer to one of the most basic questions of economics: how much money is too much? Here also, the answer would be subjective. One more extra dollar in the hands of a billionaire would hardly make any difference although the same dollar would be invaluable in the hands of a pauper.

Other than Carl Menger and Ludwig von Mises, the Austrian school also includes other big names like Eugen von Bohm-Bawerk, Friedrich Hayek and many others. Today’s Austrian school is not merely confined to Vienna but its influence spreads across the world.

Over the years, the basic principles of the Austrian school have given rise to valuable insights into numerous economic issues like the laws of supply and demand, the cause of inflation, theory of money creation, and operation of foreign exchange rates. On each of the issues, the views of Austrian school tend to differ from other schools of economics.

AVOIRDUPOIS (AVDP): The system of weights and measures most commonly used in the United States and Great Britain in which 16 avdp ounces equals 1 pound. It is used for most solid objects, but not for Precious Metals and gems. One avoirdupois ounce equals 28.35 grams or 437.50 grains.


BACKWARDATION: A market condition in which current spot price is higher than the forward price (or future contract price). Backwardation is commonly seen with supply shortages or disruptions. When backwardation occurs, it implies that investors prefer to buy the asset now rather than later. This can occur for a number of reasons, including fear that delivery will not occur in the future.

BAILMENT: The temporary placement of control over or possession of personal property by one person, the bailor, into the hands of another, the bailee, for a designated purpose upon which the parties have agreed. The term bailment is derived from the French bailor, “to deliver.” It is generally considered to be a contractual relationship since the bailor and bailee, either expressly or impliedly, bind themselves to act according to particular terms. The bailee receives only control or possession of the property while the bailor retains the ownership interests in it. During the specific period a bailment exists, the bailee’s interest in the property is superior to that of all others, including the bailor, unless the bailee violates some term of the agreement. Once the purpose for which the property has been delivered has been accomplished, the property will be returned to the bailor or otherwise disposed of pursuant to the bailor’s directions.

BAILMENT AGREEMENT: The legal relationship between Strategic Gold and the Client which delivers the strongest legal protection of the Client’s property rights over its bullion assets held in the Clear Title Account Program.

BALANCE OF PAYMENTS (BOP): A statement that summarizes an economy’s transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country’s residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The balance of payments classifies these transactions in two accounts – the current account and the capital account. The current account includes transactions in goods, services, investment income and current transfers, while the capital account mainly includes transactions in financial instruments. An economy’s balance of payments transactions and international investment position (IIP) together constitute its set of international accounts.

BANK FOR INTERNATIONAL SETTLEMENTS (BIS): An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the US Federal Reserve System. It is an international organization fostering the cooperation of central banks and international monetary policy makers. Established in 1930, it is the oldest international financial organization, and was created to administer the transaction of monies according to the Treaty of Versailles. Among others, its main goals are to promote information sharing and to be a key center for economic research.

BAR:The typical form in which precious metals are traded and accumulated. Bars for gold and silver investment come in various weights and sizes. The most commonly traded bars of investment gold are 1kg and 400 ounce (approx. 12.5kg), whilst the most traded silver bars are 1000 ounce (approx. 34kgs).

BASE METAL: Also known as pot metal; a mixture of non-Precious Metals. It is frequently used as a base for Gold-filled, Gold-plated or rolled Gold plate coverings.

BEAR MARKET: Describes investment markets, such as stock markets or metals markets, in which prices are or are soon expected to be in decline. The opposite of a bear market is a bull market.

BID: The price at which a dealer is willing to buy.The bid will stipulate both the price at which the buyer is willing to make the purchase and the quantity to be purchased.

BIMETALLIC STANDARD: A commodity-money standard which is backed by two metals, traditionally gold and silver. The currency is convertible into two metals at a fixed price.

BLACK SWAN: The black swan theory or theory is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.The theory was developed by Nasim Nicholas Taleb to explain: (a) the disproportionate role of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology, (b) the non-computability of the probability of the consequential rare events using scientific methods, and (c) the psychological biases that make people individually and collectively blind to events outside of their bounded rationality and unaware of the massive role of the rare events in history and investment markets.

Black swan events, considered extreme outliers, collectively play vastly larger roles in our lives and futures than regular occurrences.

BLANK PLANCHET: A metal disc made for coinage or bullion items, which has not yet been struck with an obverse, reverse or edge design.

BRETTON WOODS SYSTEM: 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 while World War II was still raging, 730 delegates from all 44 Allied nations gathered for the United Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. The delegates deliberated during 1–22 July 1944, and signed the Agreement on its final day.

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 by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments. Also, there was a need to address the lack of cooperation among other countries and to prevent competitive devaluation of the currencies as well.

On 15 August 1971, the United States unilaterally terminated convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency.

BRITISH SOVEREIGN: British Gold sovereigns have been struck periodically since 1489. For centuries, this .2354 troy oz coin was the measure by which all other Gold coins were judged. Each coin is 91.7 percent pure (22 karat). Sovereigns have been produced by various mints in the British Empire including London, Ottawa, Bombay, Melbourne, Sydney and Perth.

BU: Brilliant Uncirculated; used to describe a coin in new condition. It is for a coin that has no wear and shows original luster, but it may have light handling marks or other imperfections.

BULL MARKET: Describes investment markets, such as stock markets or metals markets in which prices are or are soon expected to be on the rise. The opposite of a bull market is a bear market.

BULLION: Generic name for gold and silver when in bar or ingot form. Bullion is the most traded form of gold and silver, usually in ‘good delivery bars’. The term is used in either of the following ways: 1. Gold, Silver, Platinum or Palladium coins which closely follow spot prices and have little or no numismatic value (such as restrikes and modern sovereign mint bullion coins). 2. The form in which metal is shaped, such as bars, ingots or wafers. The most commonly traded Gold bullion pieces among individual investors in the United States weigh 10 ounces or less.

BULLION BANKS: Banks that act as wholesale gold suppliers dealing in large quantities of ‘good delivery bars’. Bullion banks are required to be members of the London Bullion Market Association (LBMA) and are distinct from depositories in that they handle transactions in gold whilst depositories merely store gold bullion. For example, the New York Federal Reserve stores gold for foreign central banks and the US Bullion Depository in Fort Knox houses most of the national gold bullion reserves of the USA. When a central bank conducts gold loans or gold sales, the physical location of the bullion does not necessarily change. The bullion banks conduct the financial transactions and ownership and title transfer takes place in the depository records.

The world’s largest bullion banks that are market-making members of the LBMA are: The Bank of Nova Scotia (Scotia Mocatta), Barclays Bank Plc (Barclays Capital), Credit Suisse, Deutsche Bank AG, Goldman Sachs International, HSBC Bank USA NA, JP Morgan Chase Bank, Merrill Lynch International Bank Limited, Mitsui & Co Precious Metals Inc, Société Générale, UBS AG.

Four of the world’s largest bullion banks come together each day for the London gold fix, a traditional method by which a reference gold price is fixed for the use of participants of the gold market.

BULLION COIN: A Precious Metal coin whose market value is determined by its intrinsic Precious Metal content. They are bought and sold mainly for investment purposes. They may be produced by a sovereign mint with a denominated face value but will be considered as bullion because they trade at a price relative to its intrinsic value.

BULLION PRECIOUS METALS: Includes Gold, Silver, Platinum and Palladium. These metals are traded based on their intrinsic metal value and typically are delivered in a specific trading shape, such as a wafer, bar, ingot, round or coin.

BUSINESS CONTINUITY PLAN: is a plan to continue operations if adverse conditions occur, such as a storm, a fire or a crime. The plan includes moving operations, (recovering operations) to another location if a disaster occurs at a worksite or datacenter. For example if a fire destroys an office building or datacenter, then the people and business or datacenter operations would relocate to a recovery site.

BUSINESS STRIKE: The method of manufacture used by the mint to strike coins for everyday use. This differs from the Proof method of manufacturing, which is used to strike coins for collectors.

BUST: The head, neck, shoulders and upper chest of a person’s image, often depicted on the obverse (front) of a coin.


CALL: An option granting the right, but not an obligation, to buy a commodity or a financial security on a specified future date at a specified price.

CANADIAN MAPLE LEAF (GOLD OR SILVER): Modern bullion coins struck by the Royal Canadian Mint. Canada’s Gold Maple Leaf bullion coins were the first .999 fine Gold bullion coins (as opposed to a bar or ingot) when they were released in 1979. They were designed to be the main competitor of the South African Krugerrand, which was the only Gold bullion coin available at that time. Since 1982, they have been struck to an even finer purity of .9999 (“four nines,” or 99.99 percent pure Gold). Canada’s Silver Maple Leaf bullion coins were first issued in 1988. At .9999 fine, these coins boast the highest purity of any sovereign mint Silver bullion coin.

CAPITAL ACCOUNT: The capital account (also known as financial account) is one of two primary components of the balance of payments, the other being the current account. Whereas the current account reflects a nation’s net income, the capital account reflects net change in national ownership of assets. A surplus in the capital account means money is flowing into the country, but unlike a surplus in the current account, the inbound flows will effectively be borrowings or sales of assets rather than earnings. A deficit in the capital account means money is flowing out the country, but it also suggests the nation is increasing its claims on foreign assets.

CAPITAL CONTROLS: Capital controls are enforced measures such as transaction taxes and other limits or prohibitions which a jurisdiction can use to regulate the flows into and out of the country’s capital account. Capital controls include exchange controls that prevent or limit the buying and selling of a national currency at the market rate, limits to the allowed volume of international sale or purchase of various financial assets, transaction taxes, minimum stay requirements, requirements for mandatory approval, or even limits on the amount of money a private citizen is allowed to expatriate from the country.

CAPITAL REQUIREMENTS: Refers to the amount of capital a bank or other financial institution has to hold as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity that must be held as a percentage of risk-weighted assets. These requirements are put into place to ensure that these institutions do not take on excess leverage and become insolvent. Capital requirements govern the ratio of equity to debt, recorded on the assets side of a firm’s balance sheet. They should not be confused with reserve requirements, which govern the liabilities side of a bank’s balance sheet—in particular, the proportion of its assets it must hold in cash or highly-liquid assets.

A key part of bank regulation is to make sure that firms operating in the industry are prudently managed. The aim is to protect the firms themselves, their customers, the government (which is liable for the cost of deposit insurance in the event of a bank failure) and the economy, by establishing rules to make sure that these institutions hold enough capital to ensure continuation of a safe and efficient market and able to withstand any foreseeable problems.

The main international effort to establish rules around capital requirements has been the Basel Accords, published by the Basel Committee on Banking Supervision housed at the Bank for International Settlements. This sets a framework on how banks and depository institutions must calculate their capital. In 1988, the Committee decided to introduce a capital measurement system commonly referred to as Basel I. In June 2004 this framework was replaced by a significantly more complex capital adequacy framework commonly known as Basel II. Following the financial crisis of 2007–08, Basel II was replaced by Basel III, which will be gradually phased in between 2013 and 2019.

CARAT: A measurement of weight generally used in reference to gems, especially diamonds. It is equal to about 3.086 grains or 0.2 grams. It is not to be confused with karat, which is a measurement of the fineness of Gold.

CASH: Typically refers to American dollars, though may refer to any locally available commonly circulating currency, usually made of paper.

CASH MARKET: A market in which delivery and payment have to be made within two working days of the transaction date.

CASH PRODUCTION COST: The cost of mining an ounce of gold generally including milling, refining, and other direct production costs, but usually excluding taxes, depreciation, financing, marketing, and other indirect expenses. The exact definition may vary from one mining company to the next.

CBGA: is the Central Bank Gold Agreement. It was first signed in 1999 by the central banks of Germany, Great Britain, France, Austria, Switzerland, Belgium, the Netherlands, Ireland, Sweden, Finland, Luxembourg, Spain, Portugal, Italy and the European Central Bank. The agreement is intended to stabilize gold prices by limiting the bullion sales by central banks and was renewed in 2004, 2009 and 2014. The agreement came in response to concerns in the gold market after the United Kingdom treasury announced that it was proposing to sell 58% of UK gold reserves through Bank of England auctions, coupled with the prospect of significant sales by the Swiss National Bank and the possibility of on-going sales by Austria and the Netherlands, plus proposals of sales by the IMF. The UK announcement, in particular, had greatly unsettled the market because, unlike most other European sales by central banks, it was announced in advance. Sales by such countries as Belgium and the Netherlands had always been discreet and announced after the event. So the Washington/European Agreement was at least perceived as putting a cap on European sales.

CENTRAL BANK: The entity responsible for establishing a nation’s monetary and fiscal policy, and controlling the money supply and interest rates. In the United States, the Federal Reserve System, which is managed by the Federal Reserve Board of Governors, fulfills the role of the central bank.

CENTRAL DEVICE: The main design found on either side of a coin.

CERTIFICATES: Gold certificates are a method of holding gold without taking delivery. Issued by individual banks or bullion dealers they confirm an individual’s ownership while the bank holds the metal on the client’s behalf. The client thus saves on storage and personal security issues, and gains liquidity in terms of being able to sell portions of the total holdings without assay.

CFTC: The Commodity Futures Trading Commission (CFTC) is an independent agency of the United States government established with a mandate to regulate the commodity futures and option markets in the United States. The CFTC therefore supervises the markets for gold and silver futures and options contracts that are traded on US exchanges such as the Chicago Mercantile Exchange (COMEX) and the New York Stock Exchange (NYSE).

CHAIN OF INTEGRITY: This refers to a critical defining feature within the Primary Bullion Market. The Chain of Integrity ensures that bullion traded by London Bullion Market Association (LBMA) members maintain a traceable chain of custody among trusted trading partners. The LBMA maintains a list of acceptable member refineries that meet certain membership requirements and have passed assay tests. This is important because bullion products from these refineries will generally be accepted by other members of the LBMA at face value without further assay testing. When purchasing bullion products, the face value can generally be accepted if the product can be shown to have remained in the custody of a certified bullion repository since its manufacture by an acceptable refinery. The rules established by the LBMA create the environment whereby members can trade bullion between themselves without concern as to the quality or the purity of the bars.

CHINESE LUNAR CALENDAR: Each year, mints around the world produce Gold and Silver products inspired by the animals of the ancient Chinese lunar calendar. Starting with the Rat (followed by the Ox, Tiger, Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog and Pig), each animal comes around once every 12 years. According to Chinese tradition, the animal corresponding with your birth year represents how others perceive you or how you present yourself.

CHINESE PANDA (GOLD OR SILVER): China began striking Gold bullion coins in 1982. The Pandas were the first high-premium .999 bullion coin, featuring a different panda portrait almost every year. They became hugely popular as collectibles by the late 1980s, due to their low mintage figures. Silver Pandas were first issued in 1983 and are also popular among collectors for their .999 fine purity and changing designs. Each coin is individually sealed in a plastic pouch at the China Mint.

CLOSE: The official end of a trading session.

CODE OF BUSINESS CONDUCT AND ETHICS: A guide of principles designed to help professionals conduct business honestly and with integrity.

COIN OF THE REALM: A legal tender coin issued by a government and meant for general circulation.

COIN: A stamped piece of metal of a known weight and fineness issued for commerce.

COLLATERAL: Properties, assets or securities that are offered to secure a loan or other credit. Sometimes this collateral is put up to meet a broker or exchange’s margin requirements. Collateral can be seized by the party that extended you the credit if you default. If you have a 50% mortgage on your house, the bank has lent you this money in the knowledge that the other 50% of the house’s value has been pledged as collateral against the loan. If you suddenly become unable to pay your mortgage, the bank can recover their lost income from this collateral.

Gold Bullion bars have been increasingly accepted as collateral in the financial markets by brokers, banks and clearing houses.

COLLECTIBLE: are items of limited supply that are sought for a variety of reasons including a possible increase in value. In a financial sense, collectibles can be viewed as a hedge against inflation. Over time, their value can also increase as they become more rare due to loss, damage or destruction. One drawback to investing in collectibles is the potential lack of liquidity, particularly for very obscure items.

COMEX: One of the world’s major commodities futures exchanges where Gold and Silver are traded. It is a division of the New York Mercantile Exchange (NYMEX). COMEX gold contracts represent 100 ounces each, and the actively traded contracts are the even months of the year. The COMEX is in New York City.

COMMEMORATIVES: Legal tender coins or medallions, usually minted of Gold or Silver, struck to honor themes, events, places or people.

COMMISSION: The fee charged by a broker for the execution of an order.

COMMITMENTS OF TRADERS REPORT (COT): This is a report issued by the Commodity Futures Trading Commission enumerating the holdings of participants in various futures markets. These futures marketsare places to buy or sell, for example, grains, cattle, financial instruments, metals, petroleum, etc., and in the United States are primarily based in Chicago and New York. The Commodity Futures Trading Commission (CFTC) releases a new report every Friday at 3:30 Eastern Time, and the report reflects the commitments of traders on the prior Tuesday.

The weekly report details trader positions in most of the futures contract markets in the United States. Data for the report is required by the CFTC from traders in markets that have 20 or more traders holding positions large enough to meet the reporting level established by the CFTC for each of those markets. These data are gathered from schedules electronically submitted each week to the CFTC by market participants listing their position in any market for which they meet the reporting criteria.

The report provides a breakdown of aggregate positions held by three different types of traders: “commercial traders,” “non-commercial traders” and “nonreportable.” “Commercial traders” are sometimes called “hedgers”, “non-commercial traders” are sometimes known as “large speculators,” and the “nonreportable” group is sometimes called “small speculators”.

COMMODITY POOL: A venture, usually a limited partnership, in which investors contribute funds for the purpose of buying commodities.

CONSIGNMENT STOCKS: A bullion dealer may hold gold on consignment at a client’s premises. It is the dealer’s property until the client withdraws it and pays the prevailing price. Alternatively, consignments may be held by the dealer at local banks convenient to the client until the client come forward to purchase and take delivery.

CONTANGO MARKET: A normal futures market in which prices are higher in the succeeding delivery months than they are in the nearest delivery month. It is the opposite of backwardation.

CORONET: A small crown or tiara worn by Liberty in some of the early American coins.

CORRECTION: A movement in the price of something after a sustained movement in an opposite direction. For example, a decline in prices following a rise in a market would constitute a correction.

CORRELATION: In the world of finance, a statistical measure of how two assets or securities move in relation to each other. Correlations are used in advanced portfolio management.

COUNTERPARTY: is a term most commonly used in the financial services industry to describe a legal entity, unincorporated entity or collection of entities to which an exposure to financial risk might exist. Within the financial services sector, the term market counterparty is used to refer to governments, national banks, national monetary authorities and international monetary organisations such as the World Bank Group that act as the ultimate guarantor for loans and indemnities. The term may also be applied, in a more general sense, to companies acting in this role. Within financial services, counterparty can refer to brokers, investment banks, and other securities dealers that serve as the contracting party when completing “over the counter” securities transactions. The term is generally used in this context in relation to “counterparty risk”, which is the risk of monetary loss a firm may be exposed to if the counterparty to an over-the-counter securities trade encounters difficulty meeting its obligations under the terms of the transaction.

COUNTERPARTY RISK: The risk to each party of a contract that the counterparty will not live up to its contractual obligations. In most financial contracts, counterparty risk is also known as “default risk”.

COVER: to offset a short futures or options position.

CURRENCY WAR: Currency war, or competitive devaluation, is where countries compete against each other to achieve a relatively low exchange rate for their own currency. When the value of a particular currency falls so does the real price of exports from the country. The devaluing country’s domestic industry, and thus employment, receives a boost in demand. However, corresponding price increases in imports can harm citizens’ purchasing power. Devaluation can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade as a devaluation ‘race to the bottom’ occurs. Currency wars are one of the most destructive events in international economics. They can be limited to one country stealing growth from their trading partners, or escalate into bouts of inflation, recession, retaliation and potential violence and war.

CURRENT ACCOUNT: The current account is one of the two components of the balance of payments, the other being the capital account. The current account is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest, dividends and windfalls from investments) and net transfer payments (such as foreign aid and financial support). The current account balance is one of the two major measures of the nature of a country’s foreign trade (the other being the net capital outflow). A current account surplus increases a country’s net foreign assets by the corresponding amount, and a current account deficit does the reverse. Both government and private payments are included in the calculation. It is called the current account because goods and services are generally consumed in the current period.


DEFERRED SETTLEMENT: A situation in which the settlement of a bullion market contract is deferred by mutual agreement on a daily basis.

DEFLATION: Is properly defined as a contraction of the money supply even though many mainstream economists define it as a general fall in prices. Deflation can cause a fall in prices. But calling falling prices “deflation” is a profound confusion between prosperity and depression. There are two distinct causes of generally falling prices. The leading cause of falling prices is economic progress, whose essential feature is an increasing production and supply of goods and services, which operates to make prices fall. The other is a decrease in the quantity of money and or volume of spending in the economic system. Falling prices is the only effect that they have in common. They differ profoundly with respect to their other effects.

DELIVERABLE BAR: A Precious Metal bar with a weight, fineness and hallmark approved as a tradable unit on a commodity exchange, such as the London Bullion Market Association (LBMA). To retain its status as a deliverable bar, the bar must only be handled by LBMA-approved companies or agents.

DELIVERY: The exchange by which an underlying commodity, cash or other delivery instrument is tendered and received by the contract holder. Delivery happens when ownership of the asset is transferred from one party to the other. This does not have to be a physical movement, instead it may be done on paper acknowledging the transfer of ownership. ‘Physical Delivery’ happens when the possession of the asset is transferred from one party to the other.

DELTA: The proportion by which the price of an option changes in response to a change in the price of the underlying asset. The delta measures the sensitivity of the option’s price to changes in the asset’s price.

DEMONETIZATION: The process whereby currency (individual coins or banknotes), ceases to be legal tender. On 15 August 1971, the United States unilaterally terminated convertibility of the US dollar to gold, effectively demonetizing gold and rendering the dollar a fiat currency.

DEPOSITORY: Depositories are storage facilities, similar to professional vaults that provide a full range of specialized precious metals custody, accounting and shipping services to financial exchanges, institutions and industrial companies. They are another way of storing gold and silver bullion for the professional market.

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 physical commodities, and options on futures are derivatives of futures contracts. Derivative contracts are often characterized by high leverage.

DEVALUATION: A deliberate downward adjustment to the value of a country’s currency, relative to another currency, group of currencies or standard. Devaluation is a monetary policy tool of countries that have a fixed exchange rate or semi-fixed exchange rate. It is often confused with depreciation, and is in contrast to revaluation.

DEVICE: A design found on a coin. Frequently, it is the bust or profile of a person who symbolizes a particular country at a particular time in history, or a country’s coat of arms or insignia.

DIE: An engraved metal object used to strike or stamp the design of a coin into a blank metal planchet.

DISBURSEMENT: is the act of paying out money. A disbursement is a cash outflow.

DIVERSIFICATION: A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.

DOLLAR COST AVERAGING (DCA): is an investment strategy for reducing the impact of volatility on large purchases of assets. By dividing the total sum to be invested in the market into equal amounts put into the market at regular intervals, DCA reduces the risk of incurring a substantial loss resulting from investing the entire “lump sum” just before a fall in the market. Dollar cost averaging is not always the most profitable way to invest a large sum, but it minimizes downside risk. In essence, the technique works in markets undergoing temporary declines because it exposes only part of the total sum to the decline. The technique is so-called because of its potential for reducing the average cost of assets bought.

DORÉ BAR: A doré bar is a semi-pure alloy of gold and silver, usually created at the site of a gold mine or silver mine. These bars of gold doré or silver doré are then transported to a refinery for further purification before eventual sale onto the gold market or silver market.

DORÉ BULLION: An impure alloy of Silver or Gold named for the doré furnace used at mining facilities that produces it.

DOUBLE EAGLE: United States $20 Gold coins used as legal tender between 1850 and 1933. Double Eagles contain .9675 troy oz of pure Gold. Early $20 coins had the portrait of Lady Liberty on the obverse. From 1908 to 1933, they had Augustus Saint-Gaudens’ Standing Liberty design. This design was appropriated, with modifications, for the various sizes of the modern Gold American Eagle bullion coins.

DRAGON: Australia’s Dragons Bullion Coins. The year 2000 version of Australia’s Lunar Coins is the “Year of the Dragon.” Australia’s Lunar Calendar series began in 1997 as a ‘premium’ priced .9999 bullion coin.

DUCTILITY: An ability to change shape drastically without breaking. The capacity of a metal to be hammered into a thin sheet or drawn into a fine wire is an example of ductility.


EAGLE: United States $10 face value Gold coins used as legal tender between 1795 and 1933. Each contains 0.4837 oz actual Gold weight. Eagle is also the generic term for the modern Gold and Silver bullion coins issued by the U.S. Mint since 1986.

EDGE: The third surface of a coin, not the obverse or the reverse. The edge of a coin may be reeded, lettered or plain.

EFFICIENT MARKET HYPOTHESIS (EMH): is a theory that states it is impossible to “beat the market” over long periods of time because market efficiency causes existing asset prices to reflect all relevant information. According to EMH, assets always trade at ‘fair value’ making it impossible for investors to consistently find price discrepancies and profit from them. It should therefore be impossible to outperform the overall market through expert stock selection or market timing.

EMH is a part of modern financial theory that can be traced back to Louis Bachelier, a French mathematician at the turn of the 20th century, and is highly controversial and disputed. Academics point to a large body of evidence in support of EMH, but an equal amount of dissension also exists. Critics of EMH also point to market events where prices rise or fall drastically in manias and panics as evidence that stock prices can significantly deviate from their fair values.

EFSF: is a special purpose vehicle financed by members of the eurozone to address the European sovereign-debt crisis. It was agreed by the 27 member states of the European Union on 9 May 2010, with the objective of preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty. The Facility’s headquarters are in Luxembourg City, as are those of the European Stability Mechanism. Treasury management services and administrative support are provided to the Facility by the European Investment Bank through a service level contract. Since the establishment of the European Stability Mechanism, the activities of the EFSF are carried out by the ESM.

ERM: enterprise risk management includes the methods and processes used by organizations to manage risks and seize opportunities related to the achievement of their objectives. ERM provides a framework for risk management, which typically involves identifying particular events or circumstances relevant to the organization’s objectives (risks and opportunities), assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for their stakeholders, including owners, employees, customers, regulators, and society overall.

ETF: is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. Only authorized participants, which are large broker-dealers that have entered into agreements with the ETF’s distributor, actually buy or sell shares of an ETF directly from or to the ETF, and then only in creation units, which are large blocks of tens of thousands of ETF shares, usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long-term, but they usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates the net asset value of the underlying assets. Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market.

ETFs that buy and hold commodities or futures of commodities have become popular. For example, SPDR Gold Shares ETF (GLD) has 26 million ounces in trust (as of 7.16.14). The silver ETF, SLV, is also very large. The commodity ETFs are in effect consumers of their target commodities, thereby affecting the price in a spurious fashion. In the words of the IMF, “Some market participants believe the growing popularity of ETFs may have contributed to equity price appreciation in some emerging economies, and warn that leverage embedded in ETFs could pose financial stability risks if equity prices were to decline for a protracted period.”

EUROPEAN OPTION: An option that may be exercised only on the date of expiry. This form of option (as opposed to an American Option) is predominant in the London bullion market.

EXCHANGE CONTROLS: a governmental restriction on the movement of currency between countries. Types of controls that governments put in place to ban or restrict the amount of foreign currency or local currency that is allowed to be traded or purchased are: a) banning the use of foreign currency within the country; b) banning locals from possessing foreign currency; c) restricting currency exchange to government-approved exchangers; d) fixed exchange rates; and e) restrictions on the amount of currency that may be imported or exported.

EXCHANGE FOR PHYSICAL: A mechanism that allows a client to open or close a futures contract through the physical market when the futures market on which the contract is traded is closed. A dealer will deal for the client in the over-the-counter market and then replace the position with a futures market position when the exchange opens. The differential in the price between the spot and the futures contract is often itself referred to as the EFP.

EXIT STRATEGY: a plan for “cashing out” all or part of an investment.


FACE VALUE: The monetary value of an investment coin, which does not necessarily correspond to its actual worth. For example, the face value of a 1 oz Gold American Eagle coin is $50, but its actual worth is tied to the spot value of its Gold content — a much higher value.

FATCA: The Foreign Account Tax Compliance Act (FATCA) is a United States federal law that requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their U.S. clients. Congress enacted FATCA to make it more difficult for U.S. taxpayers to conceal assets held in offshore accounts and shell corporations, and thus to recoup federal tax revenues. FATCA is a portion of the 2010 Hiring Incentives to Restore Employment (HIRE) Act.

FAT TAIL: The term ‘fat tail’ is used to refer to extreme events of a low probability which are not forecast by market analysts. A fat-tailed distribution is one of the so-called heavy-tailed statistical distributions that describe the probability of certain events. A probability distribution with fat tails would be one in which moderately extreme outcomes were more likely than you might have expected. Fat-tail probability analysis is used in financial risk management, but it would seem that statisticians and investment professionals would sometimes disagree on what constitutes a fat tail.

FEDERAL RESERVE (Fed): The central bank system of the US, divided into 12 Federal Reserve districts each with its own Federal Reserve bank. Federal Reserve banks regulate commercial and savings banks in the district and provide emergency funding. The system is overseen and regulated by the Federal Reserve Board while monetary policy is set by the Federal Open Market Committee (FOMC).

FIAT MONEY: Paper money made legal tender by law, although not backed by Gold or Silver. From the Latin let it be done. Fiat currency is the currency system on which all global currencies are now based. It can be defined as “Paper currency not backed by gold, convertible foreign exchange, or even in some cases, government bonds,”. Fiat currency has no intrinsic value; its value is that which is decreed by government, and as a result our monetary system is now built on government debt.

FIELD: The open area or background on a coin.

FINANCIAL REPRESSION: is a term used to describe measures used by governments to boost their coffers and/or reduce debt. These measures include the deliberate attempt to hold down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers. Financial repression is also used to describe measures to facilitate a domestic market for government debt and the imposition of capital controls. The combined effect of all these measures means funds are channeled to the government that would otherwise flow elsewhere. Financial repression in China is said to be the cause of its huge accumulation of foreign currency reserves. Similarly western governments were being accused of financial repression following the 2008/2009 financial crisis as they embarked on measures including quantitative easing, capping interest rates and creating more domestic demand for their own bonds.

FINE GOLD: The purity or fineness of a Gold coin or Gold bullion item. Pure Gold is 24 karat, or 0.999 fine, Gold.

FINE SILVER: The purity or fineness of a Silver coin or Silver bullion item. Pure Silver is 99.9 percent or greater in purity.

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 American Eagle has a fine weight of 1 troy oz, but the same coin has a gross weight of 1.0909 troy oz.

FINENESS: Gold purity, usually expressed in parts per thousand; thus 995 or two nines five is 995/1000 or 99.5% pure. For example, a gold bar of .995 fineness contains 995 parts gold and 5 parts of another metal. The American Gold Eagle is 0.9167 fine, which means it is 91.67% gold. A Canadian Maple Leaf has a fineness of 0.999, which means it is 99.9% pure. Historically, 995 was the highest purity to which gold could be manufactured when good delivery was determined, but today for very high technology applications it is now possible to produce metal of up to 99.9999% purity.

FIXED EXCHANGE RATE: A country’s exchange rate regime under which the government or central bank ties the official exchange rate to another country’s currency (or the price of gold). The purpose of a fixed exchange rate system is to maintain a country’s currency value within a very narrow band. Also known as pegged exchange rate.

FLOATING EXCHANGE RATE: A country’s exchange rate regime under which the government or central bank allows the currency to fluctuate in value on the foreign exchange market, according to demand and supply for that currency in relation to other currencies. A clean float is not interfered with by governments, a dirty float or a managed float is the opposite.

FOOL’S GOLD: Iron pyrite is often mistaken by novices for Gold. Although its color resembles Gold, its properties are very different from Gold. It is hard and brittle, while Gold is soft and malleable.

FOREX: The market in which participants are able to buy, sell, exchange and speculate on currencies. The forex markets is made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The currency market is considered to be the largest financial market in the world, processing trillions of dollars worth of transactions each day.

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.

FOUR NINES: Gold of the highest purity containing at least 99.99% gold. Four nines gold is equivalent to 24 karat gold.

FRACTIONAL RESERVE BANKING: A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. As banks lend to one another, and each new bank deposit is considered money, banks can be seen as creating money and inflating the money supply. Most countries operate under this type of system.

FRENCH FRANC: A French franc was that nation’s monetary unit prior to 2005, when it was replaced by the euro. One of the most common coins denominated in francs was the French 20 franc Gold Rooster coins, which were struck from 1899 to 1916. Each of these coins is 91.7 percent pure (22 karat) and contains .1867 troy oz actual Gold weight.

FUNGIBLE: A good or asset that can be interchanged with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same.

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 MARKET: A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.


GOLD: A precious yellow metallic element that is resistant to oxidation and is highly ductile and malleable. Gold has long been used as a store of wealth and a standard for currencies worldwide. For centuries, Gold has been used in coinage, jewelry and in countless industrial applications.

GOLD CARRY TRADE: The Gold Carry Trade was a trade executed by major bullion banks and other financial institutions, often during the 1980s and ’90s, that is said to have compounded the effects of central bank activity of gold sales and gold loans. The bullion banks borrowed gold at a 1% lease rate, sold this gold (thereby exerting downward pressure on the gold price) and invested the proceeds in US Treasuries at a 5% yield. The Gold Carry Trade depended on a spread existing between the Gold Lease Rate and the rate of return provided by the US treasury market.

GOLD COLOR: Variations in the alloys used with Gold create different colors of Gold, such as yellow, green, red and white. The most common alloys used with Gold are Silver, copper, zinc and nickel. Silver and zinc tend to give Gold a greenish hue, copper a reddish cast, and nickel a white color.

GOLD CONFISCATION: An example of gold confiscation was Executive Order 6102, an executive order signed on April 5, 1933, by President Franklin D. Roosevelt “forbidding the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States”. The order criminalized the possession of monetary gold by any individual, partnership, association or corporation. Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 per troy ounce. Under the Trading With the Enemy Act of 1917, as amended by the recently passed Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up to $10,000 or up to ten years in prison, or both. The price of gold from the Treasury for international transactions was thereafter raised to $35 an ounce. The resulting profit that the government realized funded the Exchange Stabilization Fund established by the Gold Reserve Act in 1934.

GOLD EAGLE: See American Eagle (Gold or Silver).

GOLD ELECTROPLATE: Process by which 24 karat Gold is deposited on another metal electrolytically. The plating must be at least seven millionths of an inch thick.

GOLD-FILLED (GF): A process by which a layer of at least 10 kt. gold has been mechanically bonded to another metal (usually a base metal). This layer usually constitutes at least 1/20th of the total weight of the metal in the piece. Items are marked G.F. preceded by the karat fineness of the veneer. For example if a bracelet is marked 1/20 10 kt. G.F. and weighs one Troy ounce it is possible to determine the pure gold content by performing the following calculation. Pure gold content = 1/20

GOLD FLASHED: A Gold coating which is less than seven millionths of an inch thick. It is sometimes called Gold washed.

GOLD FORWARD OFFERED RATE GOFO: is the rate at which bullion banks are willing to lend gold on a swap against dollars. In other words, it is the interest that would be accrued on selling gold for dollars, and then buying it back a number of months (typically one, two, three, six or 12) later.

GOLD LEASE RATE: The gold lease rate is the spread that can be earned by lending gold or borrowing dollars then reinvesting dollars at the LIBOR rate. For example, a bullion bank is willing to lend gold for dollars on a swap at 1 per cent. The bullion bank then reinvests these dollars at the prevailing LIBOR rate of 1.5 per cent. The ‘lease rate’ in this case would be 0.5 per cent (50 basis points). Collateralizing the transaction with gold effectively reduces the borrowing costs.

GOLD LOANS: A financing mechanism whereby gold is borrowed from a bullion dealer or central bank. Sometimes, borrowed gold is sold into the market to raise cash, usually to finance a gold-mining operation. The metal is then repaid in kind over an agreed period of time. The interest on the loan is paid either in currency or in gold subject to the agreement between the counter-parties. Sometimes when commentators on the gold market talk about ‘gold loans’ they are referring to instances of central banks lending out their national gold reserves at a given rate to achieve a return. The rate of interest borrowers pay on this leased gold is known as the Gold Lease Rate.

GOLD MINER: Business or enterprise engaged in extracting gold from the earth’s crust and processing the mined material to the end product of gold bullion bars.

GOLD NUGGET: This describes raw or placer Gold which has been washed out of the rocks generally into river beds where it has been beaten by the water and rocks into a “nugget” shape.

GOLD PLATE: A common term for Gold electroplating.

GOLD PRICE: The gold price is the rate at which gold trades in relation to any number of currencies. The most referred to gold price is that quote in dollars per troy ounce. This dollar per ounce gold price has become the gold market’s reference price due to the US dollar’s status as the international reserve currency.

GOLD RESERVES: Stocks of gold, usually those held by a country’s central bank.

GOLD SALES: historical instances of central banks selling their national gold reserves to help keep a limit on the gold price. When the world’s leading banks operated the London Gold Pool, selling activity was collectively planned and although the Gold Pool was publicly understood these operations were quite secretive. After the failure of the London Gold Pool the leading central banks often announced their policies of selling gold publicly in an effort to manage the gold price and manage sentiment in the gold investment market. Major European central banks signed the Central Bank Gold Agreement (CBGA) in 1999, limiting the amount of gold that signatories can collectively sell in any one year. There have since been three further agreements, in 2004, 2009 and 2014.

GOLD/SILVER RATIO: The number of ounces of Silver required to buy one ounce of Gold at current spot prices.

GOLD STANDARD: Monetary system adopted during various periods of the 20th Century under which participating currencies were backed by gold reserves and exchange rates were fixed in terms of their value in gold. The term to designate the monetary standard of a country when all the paper money it issues is backed by a sufficient amount of a reserve holdings of gold.

GOLD SWAPS: are forms of repurchase agreements commonly undertaken between central banks or between a central bank and other types of financial institutions. They occur when gold is exchanged for foreign exchange, at a specified price with a commitment to repurchase the gold at a fixed price on a specified future date so that the original party remains exposed to the gold market. Its features are, therefore, very similar to those of a repo.

GOLD WINDOW: Term used to describe the facility in the Bretton Woods arrangement which allowed foreign banks to exchange their US Dollars for gold. The Gold Window was closed in 1971 by President Nixon.

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.

GRADE: The amount of gold (or other metal) per metric ton or ore, usually expressed in grams per ton or hundredths of an ounce per ton.

GRADING SERVICE: An independent company that grades numismatic or bullion 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: The earliest known unit of weight, it was originally one grain of wheat or barley. It is equal to 0.0648 grams troy, and 24 grains are equivalent to one pennyweight. There are 480 grains in a troy oz, and 437.5 grains in an avoirdupois ounce.

GRAM: The basic unit of weight of the metric system A metric unit of mass and weight. A gram equals approximately 1/32 Troy oz. and is used in Troy weight as a measure of gold. (31.1035 grams = one troy ounce.)

GRESHAM’S LAW: Theory that if people are allowed to use an alternate currency that is of equal nominal value as their normal currency but of higher real value (because of higher metal content or stronger purchasing power abroad), they will continue to use the old currency and hoard the alternate one, thereby taking it out of circulation. When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation. This phenomenon is commonly stated as: “Bad money drives out good”. Gresham’s Law is named after Sir Thomas Gresham (1519–1579), an English financier during the Tudor era in the Great Britain.


HALF EAGLE: United States $5 face value Gold coins used as legal tender and issued from 1795 to 1929. They each contain 0.24187 oz actual Gold weight and are almost identical in size to the nickel 5 cent coin.

HALLMARK: A stamped impression on the surface of a Precious Metal bar that indicates the producer, serial number, weight and/or purity of metal content.

HEDGE: An offsetting transaction, such as the purchase or sale of a futures contract or option, designed to lessen the effect of adverse movements in the value of assets. It entails the use of derivative instruments to protect against price risk. A hedge transaction has the specific intent of protecting an existing or anticipated physical market exposure from unexpected or adverse price fluctuations.

HEDGE-BOOK: Gold hedging locks the value of the gold that a company has in order to be able to sell it for the same price despite changes in the future. This is especially advantageous if the price of gold has gone down. The average percentage of total gold that gold mines hedge is 10%, but there are some that have gone as far as to hedge 300% of their annual production.
To implement the hedge, gold producers sell (short) enough gold futures contracts in the futures market to cover the quantity of gold to be produced. Hedging also works the other way and helps gain more profit through buying at a lower price if gold’s value has increased since the time of the deal.

HYPERINFLATION: occurs when a country experiences very high and usually accelerating rates of inflation, rapidly eroding the real value (purchasing power) of the currency, and causing the population to minimize their holdings of the local money. Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value. The value of economic items remains relatively more stable in terms of foreign currencies. However, relative prices do change over the course of the hyperinflationary period; for instance food prices in Germany during 1913–1923 rose 43% less than those of clothing, whereas they increased 80 times more than rents and 24 times more than the price index of shares. Hyperinflations are usually caused by large persistent government deficits financed primarily by money creation.


INFLATION: is a general increase in the money supply. One of the effects, that may accompany inflation (and is sometimes confused for it) is a rise in prices. Inflation is the increase in the quantity of money and money substitutes. The general rise in commodity prices and wage rates is not the definition of inflation but an inevitable consequence of inflation. Inflation is a serious and damaging consequence of government and central banks’ power of the money supply. Historically, governments have often inflated by debasing coins, but they found it is cheaper and faster by creating paper money on a printing press. A similar, but opposite effect in kind is deflation.

INSTITUTIONAL INVESTOR: A non-bank entity that trades securities and assets in large enough quantities that they qualify for preferential treatment and lower commissions. Institutional investors are protected by fewer regulations because it is assumed that they are more knowledgeable and better able to protect themselves.

INTRINSIC VALUE: The actual value of the Precious Metals contained within a bullion bar or coin.

INVERTED MARKET: A situation in which prices for future deliveries are lower than the spot price. Also known as backwardation.


JOINT ACCOUNT: A bank account that two people can use, for example two people who are married

JOINT VENTURE: Agreement between two or more companies to cooperate on a particular project or a business that serves their mutual interests. In most cases, the agreement involves the parties taking a share in the capital of a joint venture company, and sharing costs and earnings in proportion to that share.


KARAT: Measurement of purity used in showing the fineness of Gold, scaled 1 to 24. One karat is 1/24 pure Gold. 24 karat is pure Gold.

KEYNESIAN ECONOMICS: Relating to the ideas of John Maynard Keynes, who believed that, in a recession, the economy can be made to grow and unemployment reduced by increasing government spending and making reductions in interest rates. Theory based on the ideas of economist John Maynard Keynes that optimum economic performance could be achieved by influencing aggregate demand through government fiscal (public spending and taxation) policy, not through the free market philosophy characterized by the classical and neo-classical schools.

KILO BAR: A bar weighing one kilogram (32.148 fine oz).

KILOGRAM: 1,000 grams (32.148 oz).

KRUGERRAND: See South African Krugerrand.


LAISSEZ-FAIRE: The view, backed by supporters of the free market, that economic performance is optimised when there is no government interference. One of the basic tenets of classical economics. Government interference can take the form of capital controls (human and financial), regulations, taxes, tariffs and enforced monopolies. Laissez-faire is a French phrase and literally translated means “let do”, but more broadly it means “let it be”, or “leave it alone.” Much of the debates within economic and political circles centre around to what extent economies should be left to operate on a laissez-faire basis.

LEGAL TENDER: Coin or currency identified by a government to be acceptable in the discharge of debts.The medium of exchange which a country’s authorities deem to be universally acceptable in transactions. A government usually dictates what medium of exchange can be used for settling trade via legal tender laws.

LEGEND: The inscription on a coin.

LEVERAGE: Is the amount of debt in relation to equity capital. The use of borrowed capital or financial instruments to fund an investment. The more leverage used to make an investment, the greater exposure one has to movements in the price of the underlying asset. More speculative investors and traders use high degrees of leverage. When the market moves in the direction you want, leverage can help you achieve greater profits, but the problem is that is the market moves against you it can wipe cause significant losses very quickly. When used inappropriately, leverage can work to destroy the value of your equity.

LIBOR: is the London Interbank Borrowing Offered Rate. It is the rate at which banks can borrow dollars from one another on an uncollateralized basis.

LIMIT ORDER: An order placed by a client for a transaction to be executed at a specified price. The order is triggered if the market touches or betters that price.

LIQUID MARKET: A market characterized by the ability to buy and sell with relative ease. The extent to which there are sufficient buyers and sellers to ensure that your transaction would not move prices very much.

LIQUIDITY: The quality of being readily convertible into cash and with minimal impact to the price received. The term also means how easy it is to perform a transaction in a particular security or asset. A liquid asset, such as a share in a large listed company, a sovereign bond, or gold bullion is easy to price and can be bought or sold without significant price impact. With an illiquid instrument, trying to buy or sell may change the price, if it is even possible to transact.

LOCK-UP PERIOD: a window of time in which investors are not allowed to redeem or sell their assets. Lockups are designed to prevent or restrict investors from liquidating assets.

LOCO: The place at which gold is held and to which a delivery price applies. London is the common denominator worldwide and loco London represents the basis for international trading and settlement in gold and silver.

LONDON BULLION MARKET ASSOCIATION (LBMA): The LBMA is the London-based trade association that represents the wholesale over-the-counter market for gold and silver in London. The on-going work of the Association encompasses many areas, among them refining standards, good trading practices and standard documentation. LBMA members facilitate the trading of ‘good delivery‘ bars during London trading hours.

LONDON FIX PRICE: This bullion pricing standard is set each day in London by the members of the London Bullion Market Association. The “fixing price” reflects the price at which buy and sell orders from the firms’ customers are in balance. The London Fix is an internationally recognized benchmark price for that particular moment in time. There is a morning (a.m.) price fix as well as an afternoon (p.m.) price fix.

LONDON GOLD POOL: Under the “London Gold Pool” arrangement, member banks (the central banks of the U.S., England, West Germany, France, Switzerland, Italy, Belgium, the Netherlands, and Luxembourg) provided a quota of gold into a central pool, with the Federal Reserve matching the combined contributions on a one to one basis. During a time of rising prices, the Bank of England, the agent, could draw on the gold from the pool and sell into the market to cap or lower prices. In the fall of 1961, London gold prices again began to creep up. In November, with the scheme now up and running, prices were once more stabilized in the $35 – $35.20 range.

Coordinated and concerted gold sales were used to balance spikes in the market price of gold as determined by the London morning gold fixing. The United States provided 50% of the required gold bullion inventory. This effort to control the gold price was successful for six years until the system became untenable and central bank efforts were unable to resist the market’s desire for a higher gold price. The artificially pegged price of gold was too low, runs on gold, the British pound, and the US dollar occurred, and France decided to withdraw from the pool. The London Gold Pool was abandoned in March 1968.

The London Gold Pool was followed by further efforts to suppress the gold price with a two-tier system of official exchange and open market transactions, but thisgold window was closed in August 1971 by President Richard Nixon. The closure of the gold window contributed to the onset of the gold bull market in the 1970s which saw the price of gold appreciate rapidly and peak at $850/ounce in 1980.

LOT: Alternative term for a futures contract.

LUSTER: The appearance of a coin’s surface, either satiny, frosty or Prooflike.


MAPLE LEAFS: See Canadian Maple Leaf (Gold or Silver).

MARGIN: is collateral that the holder of a financial asset has to deposit to cover some of the credit risk of their broker or exchange they are using to make their investment with. Margin is required to finance an investment if the investor has done one or more of the following: a) borrowed cash or taken credit from the counter-party to enter the transaction; b) sold financial instruments short (eg – short selling a share in the hope of buying it back later at a profit); and/or c) entered into a derivative contract.

In stock trading, funds or securities deposited as collateral for a broker loan. In corporate accounts, the excess of selling price over cost price; the ratio of profit to sales, as in gross margin, EBIDTA margin and net margin. In bank lending, the difference between the value of the collateral on a loan and the actual amount lent.

MARGIN CALL: Money that is called for from the client during the life of the transaction to cover exposure resulting from an adverse price movement (or an endemic increase in margins by the exchange).

MARKET FAILURE: When a market fails to operate efficiently (inefficient market). Prices do not reflect all publicly available information, and may be influenced by monopolistic practices or government regulations. Market failure is often cited as a justification for government intervention in the market or economy. Economists study the causes of market failure, and the potential means to correct such a failure when it occurs. Some types of government interventions, such as taxes, subsidies, bailouts, capital, wage and price controls, and regulations, can lead to a further inefficient allocation of resources, failing to alleviate the perceived limitations of the market.

MARK TO MARKET: The valuation of an open position at current price levels.

MARKET MAKER: An institution or individual that quotes bid and offer prices for specific stocks or other marketable securities that it holds in inventory (often referred to as ‘makes a market in’), and is prepared and able to buy or sell those securities at any time on its own account. Note that this is not necessarily the same as a brokerage house, as a broker typically acts as an agent for a customer and charges a commission for helping to consummate a trade with another investor (rather than acting like a market maker who serves as a ‘principal’ by buying or selling from its own inventory of securities).

Market makers are normally tasked with providing sufficient liquidity in order to reduce volatility in prices and maintain a ‘fair and orderly market’ for stocks. For example, they will typically buy a stock when there are few or no other bidders in the market yet many investors wish to sell this security. By doing so, market makers can instill greater investor confidence in the financial markets and encourage these investors to send more orders to these trading centers. This can create a virtuous cycle where these additional orders result in greater depth and liquidity which, in turn, attract even more investors and orders. Thus, market makers can play an important role in terms of building and maintaining efficient and highly liquid financial markets.

MARKET ORDER: An order that an investor makes to buy or sell an investment immediately at the best available current price.

MARKET VALUE: The price at which a coin or bullion item trades.

MEDALLION: A round piece of metal resembling a coin that bears no denomination and is not recognized as legal tender. A medallion may be issued by a government or private mint. The Engelhard 1 oz Silver Prospector round is a privately minted medallion.

MEDIUM OF EXCHANGE: An instrument used to facilitate the sale, purchase or trade of goods between parties. Money, or currency, needs to be three things: a medium of exchange, a unit of account, and an effective store of value. Using a medium of exchange allows for greater economic efficiency and freer trade. Before an efficient medium of exchange, more primitive societies used a traditional barter system. Under a barter system, trade between two parties could only occur if one had and wanted what the other party had and wanted, and vice versa.

METRIC TON: 1,000 kilograms or 32,151 troy oz.

MEXICAN 50 PESO: A large and beautiful Gold coin first issued in 1921 to celebrate the 100th anniversary of Mexico’s independence. The Mexican 50 Peso coins in the bullion coin market normally are restrikes, minted from 1943 onward. Each coin contains 1.2057 oz actual Gold weight and is .900 fine.

MINT: The facility where a coin or bar was manufactured.

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 or non-historical issues of coins, whether struck for circulation or for sale to investors or collectors.

MONETARISM: School of economic thought that considers money supply as the main factor influencing the economy, and monetary policy as the key instrument of government decision-making. Controlling money supply should ensure steady economic growth and a healthy price environment. Opposed by the Keynesian school, which considers fiscal policy as the key macroeconomic tool.

MONETIZATION: refers to the conversion of an object into money, which means that it is generally accepted as a medium of exchange. Metals are monetized as coins once they are standardized in weight and accepted as money.
Government debt can also be monetized, which occurs when a government replaces its interest-bearing debt with money.

As an example, when a government spends in excess of its tax revenue it must borrow from the public. The public purchases this debt because it pays an attractive interest rate. If the government has a significant amount of debt outstanding, it may choose to purchase its own debt with newly printed currency. The government has thereby replaced its interest-bearing debt with money, and has thus monetized part of its debt.

Inflation is an unfortunate consequence of debt monetization. The public was willing to hold the government’s debt as part of its investment portfolio because the debt paid an attractive interest rate, but the same is not true for the newly printed money.

A consequence of purchasing debt with money is that now the supply of money exceeds its demand. An attempt to purchase goods and assets with this excess money supply will drive up prices, thus generating inflation. Indeed, debt monetization to finance a deficit is referred to as inflationary financing of the deficit.

MONEY LAUNDERING: is the process whereby the proceeds of criminal activity are attempted to be transformed into legitimate money or other assets. However in a number of legal and regulatory system the term money laundering has become synonymous with other forms of financial crime, and is therefore sometimes used more generally to include misuse of the financial system. Money obtained from certain crimes, such as extortion, insider trading, drug trafficking, illegal gambling and tax evasion is “dirty”. It needs to be cleaned to appear to have derived from non-criminal activities so that banks and other financial institutions will deal with it without suspicion. A money launderer is one who engages in or assists others in engaging in this illegal practice.

MONEY ORDER: Order for the payment of a specified amount of money, usually issued and payable at a bank or post office.

MS-60: The lowest grade of Mint State, or uncirculated, coins. Using the Sheldon Grading Scale, coins are graded from 1 to 70, with 70 representing a perfect coin. Coins grading MS-60 or higher are considered uncirculated; coins grading below MS-60 are considered circulated.

MONEY SUPPLY: The total amount of money in an economy. The narrow definition of money supply (classified as M0 or M1) includes notes and coins in circulation and money equivalents easily convertible into cash; the broad definition (M2, M3, M4) expands this to include various kinds of longer-term less liquid bank deposits, i.e. money that is not as easily available.
Money supply data are recorded and published by the government or the central bank. Analysts monitor changes in money supply because of its effects on the price level, inflation and the business cycle. There is strong empirical evidence of a direct relation between long-term price inflation and money-supply growth.

MORAL HAZARD: Moral hazard refers to a situation where a party makes a decision about how much risk to take, while another party bears the costs if things go wrong. This could be where the party insulated from risk behaves differently from how it would if it were fully exposed to the risk. Moral hazard arises when a contract or financial arrangement creates incentives for the parties involved to behave against the interest of others.


NAKED SHORT: A seller of a contract who does not have the metal to back up the position represented by the contract.

NATIONAL FUTURES ASSOCIATION (NFA): Futures industry trade association which promulgates rules of conduct and mediates disputes between customers and brokers.

NGC: Acronym for Numismatic Guaranty Corporation, one of two major coin grading services in the United States.

NOBLE: Modern Platinum bullion coins that have been issued by the Isle of Man since 1983.

NOMINAL FACE VALUE: Nominal value given to legal tender coins sold for their metal content. Example: The 1 oz Gold Eagle carries a $50 face value but sells for its nominal value, which includes its Gold content plus a premium of 5 to 8 percent.

NUGGET: See Australian Kangaroo.

NUMISMATIC COINS: Coins whose prices depend more on their rarity, condition, dates and mint marks than on their Gold or Silver content, if any.

NUMISMATICS: The study of coins, currency and metallic art.

NUMISMATIST: Coin collector or expert.

NYMEX: The New York Mercantile Exchange, a futures exchange where Platinum and Palladium are traded.


OBVERSE: The front of a coin. The device on the obverse usually consists of the image of one or more people or which contains the principal design of the coin.

OFFER: A motion to sell a commodity at a specified price. It is the same as the ask. It is the opposite of the bid. The offer price is the price at which a dealer offers to sell a commodity.

OPEN INTEREST: The number of contracts (long and short) outstanding in any one futures contract.

OPERATING COST: The cost of mining gold (or other minerals) usually expressed in dollars per ounce. Precise definitions may vary from company to company.

OPTION: The right, but not an obligation, to buy or sell a commodity or a financial security on a specified date in the future at a specific price. Options contracts are traded in the over-the-counter market or the exchange-traded market by banks, brokers and other large financial institutions.

OPTION PREMIUM(Strike Price): The price paid for an option is known as the premium; the strike price is the pre-determined price at which an option may be exercised.

OTC MARKET: A decentralized market, without a central physical location, where market participants trade with one another through various communication modes such as the telephone, email and proprietary electronic trading systems. An over-the-counter (OTC) market and an exchange market are the two basic ways of organizing financial markets. In an OTC market, dealers act as market makers by quoting prices at which they will buy and sell a security or currency. A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was effected. In general, OTC markets are therefore less transparent than exchanges and are also subject to fewer regulations.

OUNCE: A unit of weight. In the Precious Metals industry, an ounce means a troy ounce equal to 31.1035 grams.


PALLADIUM: A rare Silver-white metal of the Platinum group. Palladium resembles Platinum chemically and is extracted from some copper and nickel ores. It is primarily used as an industrial catalyst and in jewelry.

PANDA: See Chinese Panda (Gold or Silver).

PAPER GOLD: Paper gold investments are investments where the investor does not own physical gold bullion, but a paper claim to gold bullion or an instrument linked to the gold price. The holder of paper gold owns a credit and not the underlying tangible asset.

PCGS: Acronym for Professional Coin Grading Service, one of the two major coin grading services in the United States.

Pd: The chemical symbol for Palladium.

PENNYWEIGHT: An American unit of weight for Gold in which one pennyweight equals 24 grains or 1/20 of a troy oz.

PHILHARMONIC: See Austrian Philharmonic (Gold or Silver).

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 that is struck or pressed to produce a coin or medallion.

PLASTICITY: An ability to change shape drastically without breaking. The capacity of a metal to be hammered into a thin sheet is called malleability. The capacity of a metal to be drawn into a fine wire is called ductility.

PLATINUM: A chemical element in the periodic table that has the symbol Pt and atomic number 78. A heavy, malleable, ductile, precious, gray-white transition metal, Platinum is resistant to corrosion and occurs in some nickel and copper ores along with some native deposits. Platinum is used in jewelry, laboratory equipment, electrical contacts, dentistry and automobile emissions control devices. Platinum coins and bars are now very popular investments.

PLATINUM AMERICAN EAGLE: These are modern Platinum bullion coins minted by the U.S. Mint. These coins were first released in 1997; they are made of .9995 Platinum and were struck in 1 oz, 1/2 oz, 1/4 oz and 1/10 oz sizes.

PREMIUM: The additional cost of a coin or bullion item, over and above the spot price of the Precious Metal contained in the coin. The premium includes the costs of fabrication, distribution and a minimal dealer fee. Rare coins carry an additional premium representing numismatic value, which is based on scarcity, quality, demand and intangible factors.

PRICE CONTROLS: Government mandated minimum or maximum prices that can be charged for certain goods and services. Governments sometimes implement price controls when prices on essential items, such as food or oil, are rising problematically. Economists mostly believe that price controls are counter-productive and seldom accomplish their goal.

PRICE DISCOVERY: A method of determining the price for a specific commodity or security through basic supply and demand factors related to the market.

PRICE LEVEL: The average of current prices across the entire spectrum of goods and services produced in the economy. In a more general sense, price level refers to any static picture of the price of a given good, service or tradable security. Price levels may be given in small ranges, such as with securities prices or presented as a discrete value.

The most common price level index is the Consumer Price Index (CPI).

PRICE MECHANISM: is an economic term that refers to the manner in which the prices of commodities affect the demand and supply of goods and services. Price mechanism affects both buyers and sellers who negotiate prices of goods or services. A price mechanism or market-based mechanism refers to a wide variety of ways to match up buyers and sellers through price rationing.

PRIMARY BULLION MARKET: The Primary Bullion Market is the focus of the international Over-the-Counter (OTC) market for gold and silver, with a client base that includes the majority of the central banks that hold gold, plus producers, refiners, fabricators and other large institutional traders throughout the world. Members of the Primary Bullion Market typically trade with each other and with their clients on a principal-to-principal basis, which means that all risks, including those of credit, are between the two counterparts in a transaction. Trades are made by dealers based on US dollars per fine ounce for gold and US dollars per ounce for silver. Where you elect to take up this right, Strategic Gold will act as your agent in the transaction.

PROOF: Refers to the manner in which a coin was minted and not to its condition. Highly polished dies and special planchets are used to produce coins with a mirror-like finish. A Proof strike is very different from a business strike, and Proof coins are generally made for collectors, not for normal use.

PROPRIETARY RISK: the risk which occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm’s own money, as opposed to depositors’ money, so as to make a profit for itself. To be free of proprietary risk means that the firm will not engage in speculation of any kind.

PT: The chemical symbol for Platinum.

PURCHASING POWER:The value of a form of money expressed in terms of the amount of goods or services that one unit of the money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you’d be able to purchase.

PURITY:Gold fineness, usually expressed in parts per thousand; thus 995 or two nines five is 995/1000 or 99.5% pure. For example, a gold bar of .995 fineness contains 995 parts gold and 5 parts of another metal. The American Gold Eagle is .9167 fine, which means it is 91.67% gold. A Canadian Maple Leaf has a fineness of .999, which means it is 99.9% pure. Historically, 995 was the highest purity to which gold could be manufactured when good delivery was determined, but today for very high technology applications it is now possible to produce metal of up to 99.9999% purity.

PUT: An option that gives the owner the right to sell a commodity or a financial security on a specified date in the future, at a specified price.


QUARTER EAGLE: United States $2.50 face value Gold coins, issued as legal tender between 1795 and 1929. These dime-size coins contain .121 oz actual Gold weight.

QUANTITATIVE EASING (QE): is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective. A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary base. This is distinguished from the more usual policy of buying or selling short-term government bonds in order to keep interbank interest rates at a specified target value.

Expansionary monetary policy to stimulate the economy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates. However, when short-term interest rates have reached or are close to reaching zero, this method can no longer work. Quantitative easing may then be used by monetary authorities to further stimulate the economy by purchasing assets of longer maturity than short-term government bonds, and thereby lowering longer-term interest rates further out on the yield curve.

A central bank enacts quantitative easing by purchasing—without reference to the interest rate—a set quantity of bonds or other financial assets on financial markets from private financial institutions. The goal of this policy is to increase the money supply rather than to decrease the interest rate, which cannot be decreased further. However, if the central bank also purchases financial instruments that are riskier than government bonds, it can also lower the yield of those assets.


RALLY: An upward price movement following a decline in a market.

REAL ASSET: Physical or tangible assets that have value, due to their substance and properties. Real assets include precious metals, commodities, real estate, agricultural land and oil. They are appropriate for inclusion in most diversified portfolios – with their proportion dependent on the investor’s risk tolerance and preferences – because of their relatively low correlation with financial assets, such as stocks and bonds. They are particularly well-suited for inflationary times, because of their tendency to outperform financial assets during such periods.

RECESSION: A recession is generally defined as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

RESERVE ASSET: Reserve assets consist of external assets such as gold, currency or other financial capital that are readily available to and controlled by a country’s authorities for direct financing of international payments imbalances, for indirect regulation of the magnitude of such imbalances through intervention in foreign exchange markets to affect their currency’s exchange rate, and for other purposes. Reserve assets should be highly liquid and under the monetary authority’s direct control.

RESERVE CURRENCY: A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate. A large percentage of commodities, such as gold and oil, are usually priced in the reserve currency, causing other countries to hold this currency to pay for these goods. Holding currency reserves, therefore, minimizes exchange rate risk, as the purchasing nation will not have to exchange their currency for the current reserve currency in order to make the purchase. The US dollar has acted as the global reserve currency since it replaced the pound in the 1920s.

RESERVE REQUIREMENT: is a central bank regulation employed by most, but not all, of the world’s central banks, that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves (rather than lend out). These required reserves are normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank.

RESTRIKES: New coins made from old dies, which is why they are referred to as “new minting.” Restrikes generally have the same specifications as the original coins that they copy — this includes the same dates, composition and dimensions. Restrike coins are officially produced by a government mint and they are usually not legal tender. Government mints pick one date as the “restrike date” for a particular coin. For instance, the restrike date for the Austrian 100 Corona is 1915. Restrikes are considered bullion coins because such a large number are made that they have no numismatic value. In fact, the original coins made from the dies used for restrikes have no numismatic value because there is no way to tell them apart from the restrikes.


SAFE HAVEN: An investment that is expected to retain its value or even increase its value in times of market turbulence. Safe havens are sought after by investors to limit their exposure to losses in the event of market downturns. However, what are considered safe havens alter over time as market conditions change, and what appears to be a safe investment in one down market could be a disastrous investment in another down market. Physical gold ownership is the ultimate safe haven since it has no dependence upon functioning capital markets, banking system or currency system.

SAFE HAVEN TRADE: a trading position that is expected to produce gains in times of market turbulence based upon its exposure to the price fluctuation of a safe haven asset.

SCRAP: Material from old jewelry, electronics and telecommunications equipment, and other gold-containing items that is sent to a refiner in order to recover and recycle the precious metals content.

SEGREGATED: is the act of keeping investor assets, held by a broker or other financial institution, separate – or segregated – from the broker or financial institution’s assets.

SEIGNIORAGE: is the difference between the value of money and the cost to produce it. The term refers to the economic cost of producing a currency. If the seigniorage is positive, then the government will make an economic profit; a negative seigniorage will result in an economic loss.

SETTLEMENT DATE: The date on which a contract is scheduled for delivery and payment. Spot settlement in the bullion market is two days after the execution of the trade.

SGE: the Shanghai Gold Exchange is a non-profit self-regulatory organization, approved by the State Council, organized by the People’s Bank of China, and registered with the State Administration for Industry & Commerce, for the purpose of trading gold, silver, platinum and other precious metals. The Shanghai Gold Exchange plans to launch a gold trading platform in the second half of 2014 in the city’s free-trade zone open to foreign investors. Rules on the exchange’s “international board” are being reviewed by the central bank of China and the foreign exchange regulator.

SHORT COVERING: The closure of short positions.

SHORT SALE: The sale of an asset for future delivery without possession of the asset sold.

SHORT SQUEEZE: A situation in which a heavily shorted stock or commodity moves sharply higher, forcing more short sellers to close out their short positions and adding to the upward pressure on the stock. A short squeeze implies that short sellers are being squeezed out of their short positions, usually at a loss. A short squeeze is generally triggered by a positive development that suggests the stock may be embarking on a turnaround. Although the turnaround in the stock’s fortunes may only prove to be temporary, few short sellers can afford to risk runaway losses on their short positions and may prefer to close them out even if it means taking a substantial loss.

SILVER: A chemical element in the periodic table that has the symbol Ag (from the traditional abbreviation for the Latin “argentum”) and atomic number 47. A soft-white lustrous transition metal, Silver has the highest electrical and thermal conductivity of any metal and occurs both in minerals and in free form. This metal is extensively used in coins, jewelry, tableware and photography. It is a chemically active metal and naturally changes color or tones when exposed to air and certain elements.

SILVER AMERICAN EAGLE: See American Eagle (Gold or Silver).

SLABBED COINS: Coins encapsulated in plastic for protection against wear. Generally, slabbed coins are graded by one of the two major independent grading services: PCGS or NGC.

SOLID GOLD: Solid Gold is a term often used to describe Gold jewelry. Although the Federal Trade Commission rules do not state what constitutes something that is “solid Gold,” it is generally applied to jewelry items which are not hollow and contain at least 10 karat or finer Gold.

SOUTH AFRICAN KRUGERRAND: South African Gold Krugerrand coins were the world’s first coins struck solely as bullion items. They were introduced in 1967 and dominated the Gold bullion market through the early 1980s. They are struck in 22 karat Gold (91.7 percent pure), each coin containing a full measure of pure Gold, plus additional copper as an alloy.

SOVEREIGN DEBT: Debt issued by a sovereign nation in order to finance itself. Governments usually borrow by issuing securities, government bonds and bills which are bought and sold in the bond market. Some creditworthy nations are less able to borrow from the private investors that make up the bond market. These less creditworthy nations may need to borrow directly from supranational organizations like the IMF or World Bank. As the government draws revenue from taxing its population, sovereign debt is an indirect debt of the taxpayers. The bond market is where the world’s creditors lend money to the world’s issuers of sovereign debt at prices set by supply and demand for credit in the market.

SOVEREIGN RISK: The risk that a central bank will alter its foreign-exchange regulations thereby significantly reducing or completely nulling the value of foreign-exchange contracts.

SOVEREIGN WEALTH FUND: A sovereign wealth funds (SWF) are state-owned investment funds that manage a sovereign nation’s foreign exchange reserves. SWFs invest globally in a range of assets. Some SWFs are managed by the central bank, which accumulates the funds in the course of its management of the banking system. Other SWFs are simply the state’s savings that are invested by private entities for the purposes of investment return. The delineation between centrally managed and independent SWFs can be difficult to establish.

Most nations that have SWFs are creditor nations that generate budget surpluses and sell more goods and services (eg – commodities, energy, manufactured goods) than they import, and thus need to manage these foreign exchange reserves. These assets are typically held in domestic and foreign reserve currencies such as the dollar, euro pound and yen, while gold bullion can be used as another form of savings and liquidity. Nations that run budget deficits, like many western nations, do not have SWFs. The extreme imbalances that display themselves in today’s monetary system, where some nations have accumulated vast reserves and others have built up huge debt piles, have prompted commentators to question the viability of our current system.

SPECULATION: The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain.

SPECULATIVE LONG: A trader who has bought a forward or futures contract in the expectation of closing it out at a higher price.

SPECULATIVE SHORT: A trader who has sold a forward or future contract in the expectation of buying it back at a lower price.

SPOT: Describes a one-time open market cash transaction price of a commodity, where it is purchased “on the spot” at current market rates.

SPOT DEFERRED: A forward contract in which the contracts may be rolled forward as they mature. Delivery dates are specified in the same way as for any forward contract, but as each contract comes to maturity it may be rolled forward using the current interest rate. This is also known as a floating rate forward.

SPOT GOLD PRICE: is the quotation made by dealers based on US dollars per fine ounce for 100 ounce and 400 ounce gold bars and US dollars per ounce for 1,000 ounce silver bars. The “Spot Price” specifies that the settlement and delivery of such metals will occur two business days after the “Trade Date”. The Spot Gold Price is readily quoted in the Primary Bullion Market which is the focus of the international Over-the-Counter (OTC) market for gold and silver, with a client base that includes the majority of the central banks that hold gold, plus producers, refiners, fabricators and other large institutional traders throughout the world. Members of the Primary Bullion Market typically trade with each other and with their clients on a principal-to-principal basis, which means that all risks, including those of credit, are between the two counterparts in a transaction. Trades are made by dealers based on US dollars per fine ounce for gold and US dollars per ounce for silver. Where you elect to take up this right, Strategic Gold will act as your agent in the transaction.

SPOT MARKET: A market in which delivery and payment have to be made within two working days of the transaction date.

SPREAD: The difference between the bid and the offer price of a security or asset in a market place. The more efficient or narrow, the spread, the more efficient it is for investors to buy and sell the asset in question.

SPREAD BETTING: Spread betting is where gamblers wager on the outcome of an event, often a financial event, where the pay-off is based on the accuracy of the wager, rather than a simple “win or lose” outcome. Spread betting has grown rapidly in recent years with the efficiency of the betting process and range of bets available proving attractive. However, spread betting carries a high level of risk, and gamblers can potential lose far in excess of their stake. As a result, in the UK spread betting is regulated by the Financial Services Authority rather than the Gambling Commission.

Spread betting on the gold price can be a way for market participants to get exposure to gold. However this is far from owning a tangible gold investment of physical gold bullion. When you make a spread bet on the gold price you essentially own nothing more than a financial bet with a counterparty who may not be able to redeem your bet when you most need it. Spread betting the gold price is thus more speculative than owning physical gold as it involves large amounts of leverage.

STERLING SILVER: Silver of a fineness of 92.5 percent purity.

STOP LOSS ORDER: An order that will close out a loss-making position when the price reaches a specific level. Such trades are carried out on a best efforts basis, since it cannot be guaranteed that a specific price will be traded if the markets are moving rapidly.

STORE OF VALUE: is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. Storage of value is one of the distinct functions of money. A true store of value should retain its purchasing power over long periods of time.

STRIKE PRICE: The price paid for an option is known as the premium; the strike price is the pre-determined price at which an option may be exercised.

STRONG HANDS: The strong hands in an investment market can be said to be those who are most able to endure price volatility and those most able to sit through extended periods of stress and anxiety. Strong hands are able to sit through times when their investment may be temporarily underwater, in the expectation of higher prices and profits down the road.

It is also used to refer to a futures-contract holder who intends to receive delivery of the underlying commodity.

SYMBOLIC FACE VALUE: Nominal value given to legal tender coins, which are valued or sold for their metal content. The symbolic face value of a coin will be less than its actual market price. For example: The 1 oz Gold American Eagle bullion coin carries a $50 face value but sells for the value of its Gold content plus a premium of 5 to 8 percent.

SYSTEMIC RISK: The risk inherent to the entire market or an entire market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry. This type of risk is both unpredictable and impossible to completely avoid. It cannot be mitigated through diversification, only through hedging or by using the right asset allocation strategy.


TAIL RISK: is the risk of an asset or portfolio of assets moving more than 3 standard deviations from its current price.[1] In particular, most asset managers are only interested in the downside risk, i.e. moving more than 3 standard deviations below its current price. When a portfolio of investments is put together, it is assumed that the distribution of returns will follow a normal pattern. Under this assumption, the probability that returns will move between the mean and three standard deviations, either positive or negative, is 99.97%. This means that the probability of returns moving more than three standard deviations beyond the mean is 0.03%, or virtually nil. However, the concept of tail risk suggests that the distribution is not normal, but skewed, and has fatter tails. The fatter tails increase the probability that an investment will move beyond three standard deviations.

TOCOM: The Tokyo Commodity Exchange, the principal commodity futures exchange in Japan, trading contracts for delivery of kilobars of 0.9999 fine gold.

TOLA BARS: Gold bars measured in tolas, an Indian unit of weight. Although manufactured in Europe, tola bars are traded primarily in the Middle East, India, Pakistan and Singapore. 1 tola is equal to 180 grains or 0.375 troy oz (11.7 grams).

TREND: The general direction of a market or of the price of an asset class. Trends vary in duration from short, intermediate, and long term. Identifying a trend can be highly profitable, because you will be able to trade with the trend. It is akin to investing with the wind at your back.

TROY OUNCE: A unit of weight equal to 1.09711 ordinary or avoirdupois ounces. The word ounce, when applied to Gold, always refers to troy ounces. A troy ounce is different from the ounce most Americans are accustomed to (the avoirdupois ounce). There are 12 troy ounces in a troy pound. So, if you buy 1 pound or 12 troy oz of Gold, don’t expect it to weigh in at one pound on your bathroom scale. One troy ounce equals 31.1035 grams or 480 grains.


UNALLOCATED GOLD: Unallocated gold or pooled gold is a bookkeeping device by which a bank or other enterprise provides you with notional gold. The gold is a liability to you on their balance sheet. It is synonymous with gold ‘accounts’ and its holders are unsecured creditors.

It arises from an important legal difference between the terms under which banks look after their customers’ valuables. Unallocated gold is formally a deposit, which becomes the bank’s property and its liability to you as a depositor. The alternative agreement style – known as allocated – obliges the bank to hold your gold as your outright property, under a custodial or safe-keeping contract.

Under the law a liquidator returns your formal property to you if a bank fails. But where it is your asset – like unallocated gold (not your property) they almost certainly cannot return it to you. Instead you would be in a pool of unsecured creditors waiting to see what cash the liquidators might raise in selling all the bank’s assets. This sale would include non-performing loans, derivative and bond portfolios, and whatever stock of gold you might think was backing your unallocated gold account.

UNALLOCATED GOLD ACCOUNT: An account where specific bars are not set aside and the customer has only a general claim on the metal. This is the cheapest and therefore the most commonly used method of holding metal. The accountholder is an unsecured creditor. Banks encourage retail gold buying customers to remain permanently unallocated by charging fabrication, transportation and custody charges to customers demanding physical delivery. Those charges are particularly high where purchases cannot be delivered in exact multiples of good delivery bars.

UNCIRCULATED: A coin in new or unused condition, sometimes said to be Brilliant Uncirculated or BU. The term is often used interchangeably with Mint State.

UNSECURED CREDITOR: An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the lender (creditor) because it will have nothing to fall back on should the borrower default on the loan. A unallocated accountholder or a pooled accountholder is an unsecured creditor.


VALUE AT RISK: A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. Value at risk is used by risk managers in order to measure and control the level of risk which the firm undertakes. The risk manager’s job is to ensure that risks are not taken beyond the level at which the firm can absorb the losses of a probable worst outcome. VaR is commonly used by banks, financial institutions and other market participants to measure risk while it happens and is an important consideration when firms make trading or hedging decisions.

VALUE INVESTING: A style of investing developed in the early 1930s at Columbia University by Benjamin Graham (financial strategist), who showed an approach to find and buy stocks at a discount to their intrinsic value. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company’s long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.

Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields.

VAT: is a ‘value-added-tax’, a type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. Value-added tax (VAT) is most often used in the European Union. The amount of value-added tax that the user pays is the cost of the product, less any of the costs of materials used in the product that have already been taxed.

VERMEIL: Gold plating on another metal, usually Silver.

VOLATILITY: The extent to which the price of a security or commodity, or the level of a market, interest rate or currency, changes over time. High volatility implies rapid and large upward and downward movements over a relatively short period of time; low volatility implies much smaller and less frequent changes in value. In modern portfolio theory, a security’s beta is a measure of the extent to which its price varies according to market-related volatility.


WARRANT: A securitized product issued by a specific bank or securities house and usually carrying the name of the issuer, which gives the purchaser the right to buy gold at a certain price on a specific date. They are thus not dissimilar to options, but the pricing mechanism is generally simpler. Options are a generic instrument and would not be specifically tied to one house.

WEAK HANDS: Those market participants who are vulnerable to being shaken out of their investment positions due to short term volatility or price drops. Market participants that use significant amounts of leverage to hold their positions and are less able to keep a long term view.

It is also used to refer to a futures-contract holder who does not intend to receive delivery of the underlying commodity.

WORLD GOLD COUNCIL (WGC): is a private association that works as a market development organization for the gold industry. Its 20 members are gold mining companies which have operations in over 50 countries. The WGC undertakes research and provides educational programs. It also engages with governments and supranational organizations on gold’s role in the world of finance.


XAU: ISO 4217 code which denotes one troy ounce of gold. ISO is a standard published by the International Organization for Standardization, which delineates currency designators. Gold is actively traded on the Forex just like every other currency. In the currency markets, gold has an average daily trading volume of $249 Billion, which makes it the 5th most actively traded currency in the world. In other words, every trading day $249 billion dollars worth of credits denominated in a weight of gold trades in the currency market.

XAU INDEX: The Philadelphia Gold and Silver Index is an index of sixteen precious metal mining companies that is traded on the Philadelphia Stock Exchange. The index is represented by the symbol “XAU”.


YELLOW METAL: A nickname or slang term for gold to distinguish it from the red metal (copper) and the white metals (silver, platinum, and palladium).

YIELD: A measure of the annual return on an investment expressed as a percentage.


ZIRP: A zero interest rate policy or zirp is a route taken by a central bank to keep the base rate at zero per cent in an attempt to stimulate demand in the economy by making the supply of money cheaper. The term is also used to describe a near zero benchmark rate set by countries in the post financial crisis years, which kept interest rates near to zero and accompanied that policy with measures such as quantitative easing.

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