Precious Metals Glossary of Terms

A

Actuals
These are the physical assets or cash commodities which underly a futures contract, in contrast to the futures contract itself.

Ag
This is the chemical symbol used for silver.

Alloy
A combination of two or more metals.

Allocated Metal
A defined quantity of physical metal/s assigned to a specific account, such that each share purchased in a metal exchange-traded fund will be backed by the relevant value of that physical metal. The metal remains in the ownership of the buyer, the account-provider is only the custodian.

Approved Carriers
Operators of armoured transport built for the transportation of gold, silver, platinum and palladium, which operators have been approved by an Exchange.

Arbitrage
The simultaneous buying and selling, in different markets, of a particular commodity, so as to take advantage of the price differences between the markets.

Argentum
The latin term for silver, of which the chemical symbol is Ag.

Ask
This is the lowest price for which a dealer offers to sell a stock.

Assay
A purity test procedure to determine the weight and fineness of a precious metal.

Au
This is the chemical symbol used for gold.

Aurum
The latin term for gold, of which the chemical symbol is Au.

Avoirdupois
Common system for measuring weight of commodities other than precious metals and stones (troy system) or pharmaceuticals (apothecaries’ system). It is based on a pound consisting of 16 ounces, one avoirdupois ounce = 28.35g or 437.5 grains.

B

Backwardation
The market condition where the forward price of a certain commodity to be delivered is lower than the spot or cash price of the commodity.

Bactericides
Substances, e.g. silver salts, that kill bacteria.

Bank Wire
An electronic message system linking major banks, notifying one another of actions or occurrences regarding client accounts. The term is often used to refer to the actual transfer of funds through the Federal Reserve’s ‘Fedwire’ system.

Bar
A piece of relatively pure metal cast into a convenient form, usually a block, for further shaping, melting or refining. The term bar can be used interchangeably with ‘ingot’ in the precious metals industry.

Base Metal
A common and inexpensive metal, such as luminum, copper, iron, nickel, lead, tin and zinc, not considered a precious metal.

Basis
Basis equals cash price less futures price; it is the difference between the spot or cash price of a specific commodity and its nearest futures contract price. It may reflect different product forms, qualities, time periods or locations.

Bear Market
This describes the condition of a market when its primary trend is declining.

Bid
This term describes the price at which a dealer is prepared to buy.

Boiler Room
An operation in which fraudulent, worthless, or over-priced investments are sold to unsophisticated investors using high pressure tactics, including scare tactics, false or misleading declarations and even outright lies. Boiler rooms are often highly mobile operations consisting of a rented room with a bank of telephones.

Bonds
Financial instruments in which an entity (usually corporate or state) borrows funds for a defined time period at a fixed or variable interest rate, i.e. debt-raising through capital markets. When such paper investments are backed by gold, they are termed Gold-backed Bonds.

Broker
A professional agent who, for a fixed service fee or for a percentage commission, handles client orders to purchase and sell commodities, securities or other property or investments.

BU
Stands for ‘Brilliant Uncirculated’ and refers to a coin in new condition which retains most, if not all, of its mint luster (95%+).

Bullion
Precious metals that are officially recognised as being at least 99.5% pure.

Bullion Coin
A coin struck from precious metal that trades at a value relative to its weight, rather than its rarity or age.

Bull Market
This describes the condition of a market when its primary trend is upward.

C

Call
The right, but not the obligation, to purchase an agreed amount of a particular commodity or financial instrument at a certain specified date in the future, for a certain price.

Canadian Maple Leafs
These are modern bullion coins minted annually by the Royal Canadian Mint.

Cashier’s Check
A check or cheque guaranteed by a bank, drawn on the bank’s own funds and where the check is signed by a bank official.

Chameleon
This describes a dealer or broker who will shift his position relating to an investment according to his expectation of what will persuade an investor into entering a transaction.

Close
Also termed the “settlement”, this is the period that occurs at the end of each trading session, when transactions are considered to have been made “at the close”.

Coin
A flat metal disc or piece of metal, of a known fineness and weight, with an official stamp imprinted on it, for use and circulation as currency.

Coin of the Realm
The legal coinage of a country, issued by its government and intended for general circulation.

Comex
Formerly known as the Commodity Exchange Inc., Comex merged with the New York Mercantile Exchange in 1994 and became its metal trading division. It is a major world commodities futures exchange for trading gold, silver, copper and aluminium.

Commemoratives
These are coins or medallions minted usually of gold or silver to commemorate events, people, places or themes. Although such coins are legal tender, they are not intended for general circulation.

Commodity Pool
An investment structure or venture which is usually a limited partnership, where a group of individual investors combine their contributed funds to trade in futures contracts as a single entity, in the hope of gaining leverage.

Condition
The state in which a gold or silver coin, round or bar is found to be in when examined. These include ‘Proof’, ‘Circulated’, ‘Brilliant Uncirculated’, ‘New’, ‘Varied’, etc.

Contango Market
This is the opposite of backwardation and describes a futures market in which spot prices are higher than the futures price for a particular commodity.

Convertibility
The ease with which a currency or other financial instrument can be converted into (through legal purchase, sale or exchange) another currency, precious metals or other liquid stores of value.

Correction
A reverse movement in the market, usually in the form of a temporary decline in prices interrupting an upward trend.

Cover
To buy or otherwise offset stock that one has shorted.

Current Delivery Month
The period during the current month when a futures contract becomes available; the month closest to the scheduled delivery. Also known as the ‘spot month’.

D

Deliverable Bar
A bar of precious metal, with a fineness, weight and hallmark, which has been approved on a commodities exchange as a tradable unit.

Derivative
This represents a financial instrument or contract whose value is derived from a traditional security such as a stock or bond, an asset, a futures contract, or another financial instrument, where the buyer owns only the option and not the stock itself.

Divisibility
The ease with which a fixed weight of a specific product can be pieced out, for example, 5 one-ounce bars are more divisible than one 5-ounce bar.

Dore Bullion
A semi-pure alloy or gold or silver, usually produced at the site of a mine, using a Dore furnace, and that will later be processed to a higher purity.

Double Eagles
A US gold coin, with a denomination of $20, minted as legal tender for commerce during the period 1850 through 1933. Double Eagles contain .9675 troy ounces of gold and two types were issued; the Liberty Head (1849-1907) and Saint Gaudens’ (1907-1933).

Ductility
Malleability, or the ability of a solid material to deform under pressure so that it can be stretched into a fine wire or flattened into a thin sheet.

F

Face Value
The denomination of a coin, shown as the legal monetary value stamped on one of its faces (see also symbolic face value).

Fiat Money
Paper money declared to be legal tender by law, although its value is not based on the material of which it is made, nor is it backed by an equivalent value of precious metal.

Field
The background area on a coin, not used for design or inscription.

Fineness
The proportion, or ratio by weight, of a pure precious metal used in an alloy, usually expressed as parts per thousand or percentage. A US Gold Eagle is .9167 fine, so it has a fineness of 916.7 parts per thousand, or 91.67%

Fine Silver
Silver with a fineness of 99.9%, also called pure silver.

Fine Weight
The weight of precious metal in a coin or ingot as determined by multiplying the gross (total) weight by the fineness. For example, a US Gold Eagle 1-oz gold coin has a fineness of .9167 and thus a gross weight of 1.0909 troy ounce.

Forward Transaction
“This describes the buying or selling of a good or service at a certain price for delivery on an agreed future date; it differs from a futures contract in that it is negotiated between individual parties and is thus not subject to the regulations and standardized procedures and regulations applicable in a commodities futures exchange.”

Futures Contract
A standardized contract to take or make delivery of a specific amount of a commodity or a financial instrument on a specified date in the future, traded on a formal commodities futures exchange.

G

Gold
A lustrous yellow, inert, precious metal, heavy but highly malleable and ductile. Because it is not subject to oxidation or corrosion, it has universally been considered a store of wealth as coinage, jewellery or bullion, as well as being used in numerous industrial, health-related and electronic applications.

Gold/Silver Ratio
The amount, or number of ounces, of silver, in terms of its value, needed to buy one ounce of gold at the current spot price.

Gold Eagles
US gold bullion coins produced by the US Mint since 1986 in four sizes: 1-oz, 1/2-oz, 1/4-oz and 1.10-oz.

Gold Standard
A monetary system in which the currency is based on, or backed by, the amount of gold that is held in the country’s reserves, such that the paper money is convertible into, or interchangeable with, gold.

Good Delivery
The specification that is set for a bar of precious metal to be accepted for delivery at a any particular exchange.

Good Delivery Bar
A precious metal bar that meets the specification for delivery against a metals contract (e.g. minimum fineness of .995 for gold bars).

Grading Service
A company that appraises the value of numismatic coins and grades them accordingly. Graded coins are usually ‘slabbed’ or encased in a sealed plastic holder. Numismatic Guaranty Corp. (NGC) and Professional Coin Grading Service (PCGS) are the two main grading services in the USA.

Grain
Nominally based on the weight of a single seed of cereal, a grain was the earliest unit of weight used for gold. There are 480 grains in a troy ounce and 15.4324 grains in a gram.

Gram
One-thousandth of a kilogram in the metric system. One troy ounce is equal to 31.1035 grams.

H

Hallmark
A symbol or set of symbols stamped on an item of bullion to indicate its origin.

Hedge
A transaction intended to protect an existing or expected physical market exposure from adverse or unforeseen price fluctuations.

I

Inflation
Inflation is generally used in two contexts, monetary inflation and price inflation. The former is defined as an increase in the money supply, leading to an increase in the cost of goods and services, whereas the latter refers to the rate at which the general price levels of goods and services are increasing.

Ingot
A piece of relatively pure metal cast into a convenient form, usually a block, for further shaping, melting or refining. The term bar can be used interchangeably with ‘ingot’ in the precious metals industry.

In-Transit Metal
Metal is “in transit” for the brief period which may occur when it has been purchased, but has not yet been allocated to an account, even though its ownership has already changed.

Intrinsic Value
The value of the metal content of a coin.

Inverted Market
This is also termed “backwardation”, and refers to the situation where the price for a future delivery is lower than the cash or spot price of a commodity.

Investment
The purchase of an asset with the intention of making money either via growth in the value of the asset, or through the production of income, in excess of its purchase price and costs, during the period of possession of the asset.

J

Junk Silver
A silver product with a silver content less than 90%, usually between 35% and 90% as in some pre-1965 silver coins.

K

Karat
A unit for measuring the fineness or concentration of precious metals. American Gold Eagle coins are 22 carat (.9167 fine), whereas Chinese Gold Panda coins are 24 carat (.999 fine) – considered ‘pure’ gold.

Kilo Bar
A bar having a weight (or mass) of one kilogram (32.1507 troy ounces).

Kilogram
A metric measure of mass equal to 1,000 grams or 32.1507 troy ounces.

Koala
An Australian platinum bullion coin minted by the Perth Mint since 1987, with a fineness of .9995.

Krugerrand
A South African 1-oz gold coin first issued in 1967, with 1/2-oz, 1/4-oz and 1/10-oz sizes introduced in 1980. It has a fineness of .9167.

L

LBMA
The abbreviation for London Bullion Market Association, an organization that issues certification for investment-grade silver and gold.

Legal Tender
This is a term for coinage which can be employed as national currency, even if it is made of precious metal. For example, the Canadian Gold Maple Leaf has a face value of 50 Canadian Dollars.

Licensed Warehouse
A storage facility approved for the safekeeping of gold or silver deliverable against gold or silver futures contracts.

Licensed Weightmaster
An organization granted the approval of an exchange to witness and to verify the weighing of gold or silver delivered against a gold or silver futures contract.

Liquidity
The ease with which convertibility into currency can be achieved.

London Fix
One of two daily bidding sessions of the five major gold trading firms in London, at which the gold price is set, or ‘fixed’.

Luster
The diffuse reflective qualities produced on the surface of a coin during the minting process, most noticable on uncirculated coins.

M

Malleable
Capable of being shaped, usually by hammering or pressing, without fracturing or shattering.

Maple Leafs
Gold 1-oz coins minted annually by the Royal Canadian Mint since 1979, with the addition of 1-oz silver and platinum coins in 1988. Since 1982, variant sizes have been issued.

Market Value
The price, irrespective of its intrinsic value, at which a bullion item or coin will trade. Usually, this value is the intrinsic value plus any premium or less any discount arising from prevailing market conditions.

Medallion
This may resemble a coin but it is not classified a ‘coin of the realm’, and might be issued by a private or government mint, often to commemorate a person or event, for example, the 1981 Mark Twain 1-oz American Arts Medallion (.900 fine gold).

Melt Value
The intrinsic value of a bullion bar or a coin, the price of the precious metal of which it is made multiplied by its precious metal content.

Metric Ton
One thousand kilograms (1,000kg); 32,151 troy ounces.

Mint
An industrial facility that is officially appointed as the primary producer and distributor of a country’s coin currency. Private mints, e.g. APMEX, fabricate bullion bars, rounds and medallions.

Mint Mark
A stamped letter, symbol or inscription on a coin for the purpose of identifying at which minting facility the coin was produced.

Mint State
This term is used to describe a coin in its uncirculated condition.

Modern Issues
Coins minted relatively recently, either for circulation or for purchase by collectors and investors.

Market Value
This value is the intrinsic value plus any premium or less any discount arising from prevailing market conditions.

Money Order
A certificate, usually issued by and payable at a banking institution or post office, enabling the named payee to receive a specified sum of money.

MS-60
This is the lowest grade attributed to a Mint State coin, the highest grade being MS-70. Coins that show wear will be graded from AU down to G, the latter exhibiting great wear and the former showing little wear (About Uncirculated).

N

NGC
Numismatic Guaranty Corporation, which is one of the main coin-grading agencies in the United States.

Noble
The world’s first platinum bullion coin, produced by Pobjoy private mint in the UK for the Isle of Man, a British dependency, from 1983 to 1989. Also called the ‘Manx’, it was minted in ten different sizes, but only the 1-oz, 1/2-oz, 1/4-oz 1/10 and 1/20-oz were issued in significant volumes.

Nugget
An Australian gold bullion coin produced by the Perth Mint since 1986, with a fineness of 99.99% (24 carat), in 1-oz, 1/2-oz, 1/4-oz, 1/10-oz and 1/20oz denominations. 2-oz, 10-oz and 1kg coins were introduced in 1991 and, in 2011, a one tonne coin was minted, the largest coin ever at the time.

Numismatic Coins
Coins typically having a higher value than their face value or precious metal content, owing to historical factors such as rarity, condition, age and mint marks.

Numismatist
A collector of student of coins, medals, paper money and other payment media.

NYMEX
Stands for New York Mercantile Exchange, a physical commodity futures exchange, trading in the energy (mainly oil), palladium and platinum markets.

O

Obverse
The ‘head’ side of a coin, that is, the front of the coin containing the principal design.

Option
The right, but not the obligation, to purchase or sell an asset, commodity or financial instrument at a set price on or before a given date in the future.

Ounce
A unit of weight in which 16 ounces make a pound, and a troy ounce in the precious metals industry is equal to 31.1035 grams.

P

Palladium
This is a rare, lustrous, silver-white metal which does not oxidize at standard temperatures. It is one of the platinum group metals (PGM), of which it has the lowest melting point, and it is largely used in catalytic converters, but also in fuel cells and in electronics, dentistry and jewellery.

Pd
This is the chemical symbol used for palladium.

Pennyweight
A commonly used unit of weight for gold in North America, equal to 1/20 troy ounce or 24 grains.

Physicals Market
A commodity market in which the actual commodities are traded, in contrast to a futures market, in which only the rights to buy and sell commodities (contracts) at a future date are traded, and delivery of the physical product may or may not actually occur.

Planchet
A round metal disk ready for striking a coin or medallion, also termed a ‘blank’.

Platinum
This is a dense, highly unreactive, malleable, ductile, precious grey-white transition metal that is corrosion-resistant even at high temperatures. It is one of earth’s rarer elements, occurring in some nickel and copper ores. Platinum is largely used in catalytic converters, but also in electrical contacts, dentistry and jewellery.

Premium
The dollar amount by which the market value of a bullion bar or coin exceeds its intrinsic or melt value. Premiums may also be expressed as a percentage, and are generally higher on coins than on bars.

Proof
A coin specially struck for collectors, produced using polished dies and struck with greater than usual pressure, resulting in a more sharpness of detail and highly polished fields. They command a higher premium than BU or circulated versions of the same coin.

Pt
This is the chemical symbol used for platinum.

Purity
This is the measure of the precious metal content of a bar, round or coin, and is usually displayed in a per-mille format as .xxx, or as a percentage. A .9167 fine gold coin contains 91.67% gold.

Put
This is an option, or stock market device, granting the owner the right, but not the obligation, to sell the underlying futures contract or commodity at a specified price on or before a specified future date. It is the opposite of a ‘call’.

R

Rally
An upward movement in prices following a market decline, also termed a ‘recovery’.

Restrike
A coin officially struck from genuine dies of a formerly circulating issue. Some 1804 Silver Dollars were restrikes.

Reverse
The back or ‘tail’ side of a coin, with an alternate design normally indicating the coin’s face value.

Rounds
An abbreviation of ‘silver rounds’, these are bullion pieces that are usually privately minted. Silver rounds are 1-oz .999 fine pieces of silver about the size of a silver dollar.

S

Secure Vault Storage
A vault with security measures including fire proofing, sensor alarms, anti-theft devices, biometric access control, armored walls and complex locking systems is used to securely store fully insured allocated and in-transit precious metals in segregated storage spaces.

Short Sale
The sale of a security that is not owned by, nor in the possession of, the seller, for delivery at a future date.

Silver
A shiny greyish-white ductile transition metal with the highest thermal and electrical conductivity characteristics of any metal. Although it occurs naturally in its free elemental form, most silver is produced as a byproduct when refining gold, copper, zinc and lead, and is used largely in jewellery, tableware, electrical equipment and as a chemical catalyst.

Silver Eagles
These are 1-oz silver bullion .999 fine coins minted in the United States since 1986. They are the official silver bullion coin of the USA and are only struck in one troy ounce size.

Silver Rounds
These are 1-oz .999 fine silver bullion pieces that are usually privately minted, and are about the size of an official US Silver Eagle dollar coin.

Slabbed Coins
Graded coins are generally ‘slabbed’ or encapsulated in a sealed plastic holder to protect them from damage and wear.

Sovereign
An English gold coin first issued in 1489. In 1817 its weight was set at 1,320/5,607 (0.23542) troy ounces (7.9881 grams) of 22 carat gold and its value at one pound (20 shillings). It was a fully circulating coin before 1932, but since then has been largely issued as a commemorative bullion coin.

Spot
The current price of a physical commodity for immediate delivery, usually 1,000-oz bars of silver or 100-oz bars of platinum or gold. Also called the cash price.

Spot Market
A public financial market in which payment for, and delivery of, financial instruments or commodities must be effected not more than two working days after the date of the transaction.

Spread
The gap between the bid (buying) price for a bullion coin or bar or a trading unit, and the ask (selling) price.

Sterling Silver
An alloy of silver, .925 fine, usually mixed with copper.

Symbolic Face Value
This is the nominal value indicated on legal tender coins that are traded for their precious metal content. For example, the Canadian Gold Maple Leaf has a face value of 50 CAD imprinted on it, but its market value is the value of its gold content plus a premium of several percent.

T

Tola
This is a traditional unit of weight in India and is equal to .375 (3/8) troy ounce or 180 grains.

Tola Bars
Gold bullion bars, .999 fine, which are produced in 10 tola, five tola and one tola sizes. Tola bars are popular in India, Pakistan, Singapore and parts of the Middle East, although they are produced in Europe.

Troy Ounce
The unit of weight with which precious metals are measured, one troy ounce is equal to 1.09711 avoirdupois ounces, 480 grains, or 31.1035 grams.

Troy Pound
Equal to 12 troy ounces, this is an academic term rarely used in practice.

U

Unallocated Metal
These are in reality an investment structure and the ‘metals’ product may not even exist in physical form. They represent accounting assignments to a statement account. The buyer does not gain title to any specific bar or bars, but only obtains a proportionate interest in the ‘pooled holding’ of the product. The bullion may be lent out without the consent or knowledge of the owners, and, in the event of bankruptcy or insolvency of the holder, the buyer ranks as an unsecured creditor of the holding institution.

Uncirculated
A coin in ‘mint’ or new condition, it may be classed ‘BU’ – brilliant, uncirculated.

W

Weight
The stamped weight found on a coin, round or bar, for example, a 10-oz silver bar.

World Gold Council
A non-profit market development organization for the gold industry, based in London, the WGC’s 23 members include the world’s leading gold mining companies. It represents about 60% of global corporate production of gold an covers markets comprising approximately 75% of annual global gold consumption.

Y

Year
The year in which a gold or silver coin is issued, as indicated on the face thereof, for example, a 1980 Krugerrand.

Yield
The percentage return on an investment, calculated annually.