ALLOCATED ACCOUNT

An account suitable for a client requiring metal to be physically segregated and with a detailed list of weights and assays.

 

ALLOY

A mixture of two or more chemical elements, including at least one metal.

 

ALLUVIAL GOLD

Small particles and nuggets of Gold commonly found by rivers or ancient drainage systems. Such finds caused the famous Gold Rush in the mid 1800s.

 

ASK

The price at which a dealer is willing to sell (see also OFFER).

 

ASSAY

The test to find the purity or fineness of a precious metal.

 

ASSAY OFFICE

An official or statutory independent organisation controlling the testing of precious metal fineness and composition.

 

BACKWARDATION

A rare situation caused by tight supply causing spot or nearby prices to go for a premium over forward quotations.

 

BEAR

Someone who expects prices to fall.

 

BEAR MARKET

A market in which the trend is for prices to fall.

 

BID

The price at which a dealer is willing to buy.

 

BULL

Someone who expects prices to rise.

 

BULL MARKET

A market in which the trend is for prices to rise.

 

BULLION

The generic word for Gold and Silver in bar or ingot form.

 

BULLION COINS

Contemporary precious metal coins minted by official agencies in unlimited numbers for investment purposes.

 

CARAT

The purity of Gold described by its fine content in parts of 24.

 

CERTIFICATES

A convenient way of confirming an investor’s ownership of Gold without physical delivery.

 

CONTANGO

The premium on the spot price for future (forward) delivery (see Forward Premium)

 

CLEARING PROCESS

To avoid the security risks and costs of physical movements of metal, a system of paper transfers whereby members of the clearing process utilise unallocated accounts that they maintain between each other.

 

DEFERRED SETTLEMENT

An arrangement whereby settlement of both sides of a bullion deal, metal and money, are deferred on a day-to-day basis.

 

DELIVERY

The actual transfer of the ownership of precious metal. It may not involve physical movement of the metal and is usually made by paper transfer in the LBMA clearing system. It can also involve the physical delivery, usually at the vaults of the seller or other agreed vault, of specific bars of allocated metal.

 

DERIVATIVE

A financial instrument derived from a cash market commodity, futures contract or other financial instrument. Derivatives can be traded on regulated exchange markets or over-the-counter.

 

DORÉ

An unrefined alloy of Gold with variable quantities of other metals produced at a mine.

 

EFP

Exchange for physical. The physical allocation of metal held on account or owed against a futures contract, usually attracting a charge.

 

FINENESS

The proportion of precious metal in an alloy expressed as parts per 1000.

 

FIXING

In the London Bullion Market, the price of Gold is fixed twice a day, morning and afternoon. Five fixing members, in contact with their trading desks, agree a single  price at which they will buy and sell Gold.

 

FORWARD PREMIUM

The difference between spot and forward quotations which will be determined by money and precious metal interest rates and storage charges. (see CONTANGO)

 

FUTURES

A legally binding contract for the delivery of a specified quantity of bullion, on a specified date, at an agreed price.

 

GOOD DELIVERY

The specification which a bar must meet in order to be acceptable for delivery in a particular terminal market.

 

HEDGE

A transaction entered into in order to offset the impact of adverse price movements of an asset.

 

KILO BAR

A popular Gold or Silver bar available in .995 or .9999 fine.

 

LOCO

The reference to the physical location of the metal.

 

LONG

Long position means the purchase and retention of an asset.

 

LBMA

The London Bullion Market Association, formally incorporated in December 1987 to represent the interests of the participants in the wholesale bullion market and encourage the development of the London market in every way.

 

LPPM

The London Platinum and Palladium Market, formally incorporated in 1987 to represent the interests of the participants in the wholesale Platinum and Palladium markets and encourage the development of the London market.

 

MARGIN

Deposit or collateral required as a security against open positions in futures, forwards or options markets.

 

MARGIN CALL

The request for additional funds to cover losses on forward or futures contracts where there has been a detrimental price movement.

 

MARK TO MARKET

The revaluation of metal holdings, futures or forward transactions against current market values.

 

MARKET MAKER

A dealer who is willing to quote bid and ask prices to clients and counterparties, usually at a narrow spread.

 

NUGGETS
Small pieces of Gold usually found in alluvial deposits.

 

NUMISMATICS

The specialised sector of coin collection, study and trading.

 

OFFER
The price at which a dealer is willing to sell.

 

OPEN POSITION

A market position that has not been closed out.

 

PRECIOUS METALS

Usual term for Gold, Silver, Platinum, Palladium and other Pt group metals.

 

REFINING

The separation and purification of precious metals from other metals.

 

SETTLEMENT DATE

The date on which a contract must be fully paid for and delivered.

 

TROY OUNCE

The traditional unit of weight used for precious metals. One troy ounce equals 31.1035 grams.

 

UNALLOCATED ACCOUNT

An account where specific bars are not set aside and the client has a general entitlement to metal. The holder is an unsecured creditor.

 

VARIATION MARGIN

Additional margin or collateral payable by an investor as a result of an adverse movement in the value of the underlying asset in a forward or futures contract.

 

WHITE GOLD

An alloy of Gold containing Silver, Platinum or often Nickel, to whiten the carat Gold. (Reference should be made to the EU regulations controlling the use of Nickel in jewellery.)