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Glossary B

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A market situation where the spot price trades at a premium to the forward price. Opposite of contango. Unlike the base metals, the price of gold rarely lapses into backwardation although this did occur briefly on November 28 1995 in the near month only.


Favouring a negative view of future price movements (opposite of bullish).


A certificate of liability of a deposit institution payable in the specified asset on demand to the bearer of the certificate. Paper currency (cash) is the most common example of a bearer instrument. Bearer instruments can be digitized, in which case they are called electronic cash. Bearer instruments can be transferred anonymously and do not rely on government to enforce the transaction and therefore have much lower transaction costs than book entry accounting transactions. Bearer instruments can be used to represent money (currency) as well as stocks (bearer shares) and bonds (bearer bonds) and even derivatives.


An investment measure of price volatility relative to other, competing, investments; in other words the measure of one commodity’s performance against others.


A political monetary system in which both gold and silver circulate as official money and where the price of silver is pegged to gold at a constant ratio. Fixed bimetallism inexorably leads to either gold or silver disappearing from circulation due to changes in the supply and demand not reflected in the official ratio.


Bank for International Settlements established in 1930 as the Central Banker to the Official Sector. Based in Basel, Switzerland and holds 200 tonnes of gold for its own account.


Two mathematicians (Fischer Black and Myron Scholes) who, in 1973, pioneered option pricing theory in general and not specific to gold.


Any interest-bearing or discounted government or corporate security that obligates the issuer to pay the bondholder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. Bondholders have an IOU from the issuer, but no corporate ownership privileges, as stockholders do.


A technical chart development during which the gold price suddenly breaks through levels of known or expected resistance.


Favouring a positive view of future price movements (opposite of bearish).


Originally a verb meaning to refine or melt precious metals including gold. Today refers to gold e.g. “bullion trading” or “bullion coins and bars”. Bullion is specifically defined as “precious metal in a cast form with purity of 99.5 or higher”.


As well as meeting Good Delivery Standards and maintaining the Chain of Integrity, it is critical that bullion bars are correctly stored and insured. Because it is impractical and unsafe to store large quantities of precious metals bullion privately, investors use vault facilities. In addition, insurance is generally not available when bullion is stored in private vaults or safety deposit boxes. Many investors and financial advisors are unaware of the difference between Allocated Storage or Custodial Storage and Unallocated Accounts.


Gold mined and produced as a consequence of mining other metals, normally copper but also lead and zinc. Gold, and often silver, produced in this way, greatly enhances the profitability of a base metal mining operation offering substantial by-product metal credits.