GOLD: USD/oz1,216.25 | EUR/gr36.42SILVER: USD/oz17.23 | EUR/gr0.5176

glossary

Glossary

AGIO  
Difference between the market value of a precious metal coin and the intrinsic value, or rather the value of the metal. 

FUNDAMENTAL ANALYSIS         
Studies the evolution of the market through macroeconomic surveys, also considering the economic-political factors of a country.       

TECHNICAL ANALYSIS   
Technical analysts use graphs that represent historical prices and volumes traded to predict whether the tendency of the market will be positive or negative and whether the tendency will last for a long or short time. 

ARBITRATION
Sale of one currency against another currency or goods against other goods on a different stock exchange to make money from the price differences.       

BACKWARDATION 
Situation which occurs on forward markets of goods when the spot price exceeds the forward price.

BROKER 
Professional that acts as an intermediary between seller and buyer on financial or raw material markets retaining a commission for himself, without creating his own positions.

BULLION(Precious Metals)        
Originally had the meaning of “casting” or “mint”, probably deriving from the French bouillon, boiling. 

CALL(OPTION) 
The buyer of the option pays a premium for the right to purchase a certain amount of gold or currency at a determined price and at a certain date. He has the right but not the obligation to purchase the currency or the precious metal that the option concerns.

CHANNEL
Consists of two parallel channels that compress the recent maximums and minimums. Its inclination indicates the current tendency.         

CARAT
Unit of measure of the purity of gold. Unit of measure for precious stones: 1c = 0.2053 grams. 

CASH FORWARD
Spot contract with deferred execution date. The interest, calculated at the valid rate on the monetary market for the relative currency is added to the price in cash. 

CERTIFICATES
Gold certificates are a method of owning gold without material delivery. Issued by individual banks, they certify the ownership of the holder, while the metal is kept at the bank on behalf of the client. In this way the client saves on the personal custody and security, and purchases liquidity in terms of the ability to sell portions of what he owns (if necessary) with a simple phone call to the custodian bank.

CFCT
Abbreviation of Commodity Futures Trading Commission, the body in the USA responsible for monitoring future transactions on goods.

CHART

Graphical representation of price performance.             

Counter Closure

Closure of short positions

CIF
Abbreviation of "Cost, Insurance, Freight". The CIF price of goods includes their cost, insurance expense and transport to destination. 

CLEARING 
Compensation system for transactions on stock or on goods, that guarantees for the buyer or the seller the fulfillment of the contract without the intervention of a broker.

COMEX 
The New York Commodity Exchange, now a division of the NYMEX, the New York Mercantile Exchange. Contracts on the COMEX gold market consist of 100 ounces each and contracts are actively traded in the even months of the year. 

COMMODITIES 
English term used for goods or raw materials.  

DELIVERY
Transfer of a good from the seller to the buyer. It does not necessarily imply the physical shipment but may be performed on paper, leaving the precious metals in the vault of a specific bank. 

ALLOCATED ACCOUNT
Account in which the client’s metal is individually identified as his and kept physically separate from all the other gold in the vault; in the case of default by the custodian bank, the investor becomes a guaranteed creditor.            

NON ALLOCATED ACCOUNT
Account in which the client’s bullion are not specifically separated, and which can be less expensive than an allocated account as some banks do not charge for custody. The client however is exposed to a greater risk with respect to the counterpart since he is not a guaranteed creditor in the case of default by the custodian bank.             

Non standardized forward contracts    
A capital contract (off the stock exchange) that trades an asset with the balance in a future specific date. All non standardized forward contracts are “made to measure”.           

Future  Contracts
An agreement to buy or sell a specific quantity of a good or a financial instrument at a particular price at an agreed future date; the contract can be sold before the balance date. Future contracts are standardized and are traded with a “margin” on future exchanges, such as the COMEX division of the NYMEX, the CBOT, or the TOCOM.             

Hedging
The use of derivative instruments to protect against risks linked to prices.        

Delta Hedging
Metal purchased (sold) by the trustor of a call (put) to cover the potential risk. The more the price of the underlying good moves in favour of the person purchasing the option, the greater the risk for the trustor that the option will be exercised against him; he must be covered against this risk. 

Liquidation date
Date on which the delivery and payment are due. The immediate settlement on the precious metal market takes place two days after the conclusion of the transaction.               

Delta
The proportion by which the price of an option changes in response to the change in price of the underlying good. The delta measures the sensitivity of the price of the option to changes in the price of the good.

Backwardation
The difference between the forward price and the spot price when the latter exceeds the former. 

Differential
The difference between the Bid price (the price the buyer is prepared to pay for the gold) and the Ask price (the price at which the seller offers to sell it).            

EFP (Exchange for physical)       
Mechanism that allows a client to open or close a futures contract through a physical market when the relevant futures Exchange is closed. A commercial operator will negotiate on behalf of the client on the non-regulated market and will then substitute the position with a position on the futures Exchange when the Exchange opens. The price differential between the cash and the future contracts is often itself called EFP. 

Open interest  
The number of contracts (long and short) to be carried out in a futures contract.          

Fixing
The fixing of the price of gold in London (see: www.goldfixing.com) takes place twice a day telephonically and sets a price at which all purchase and sale orders can be made on a spot basis at the time of the fixing. The fixing is widely used as a reference for spot transactions on the market. The five members of the fixing “meet” at 10.30 and at 15.00, London time, and begin the fixing with a trial price. When Rothschild’s place is sold, there will again be five members for the fixing. The representatives of the members of the fixing refer the price to the Market, which is in contact with the interested precious metal operators (or that have interested clients) and they declare how much metal, on a net basis, they want to buy or sell at that level. The operators are in turn in contact with their clients, who can change their order, or add or cancel the order at any time. The position declared by the operators is the net position of all its clients (therefore, if a bank has clients that want to buy a total of two tonnes, and other clients that want to sell a total of one tonne, then he declares he is buyer of one tonne). Each member of the fixing established his position and declares, as representative of the interested parties, whether he is a net buyer or seller (and of how much), or whether he is balanced. If the market is not balanced, with demand for gold exceeding the supply, the price will be raised (and viceversa) until a balance is reached (as some clients will withdraw or modify their order if the price does not satisfy them. At this point the price is declared to be fixed. On very rare occasions, the price is fixed even if there is an imbalance, at the discretion of the fixing chairman. The fixing is therefore entirely open and any user on the market can take part through his bank.             

GOFO
Gold Offered Forward Rate, the rate at which the dealers will lend their gold in exchange for American dollars. 

LAKH
Trading term that means 100,000 and derives from the Indian term with the same meaning. 

LBMA
The London Bullion Market Association acts as a coordinator of the activities performed on behalf of its members and other participants at the London Bullion Market, and is the main contact point between the market and its regulators.        

SUPPORT LINE 
Line that marks the lower part of a trend.          

BULLION
Bar of precious metal with purity no lower than 995.00 thousandths.   

Liquidity
A quality of a financial instrument that makes it rapidly convertible into cash without a significant loss of value.            

LONG
Purchasing position in a forward market.           

MARGIN
Guarantee that must be supplied in forward transactions or in the case of sale of options, to cover the exchange rate risk. 

MARGIN (initial)             
The amount of money put down by contract at the start of the transaction.    

MARGIN (maintenance)

Amount that has to be maintained on deposit during the course of the transaction. 

NEGOZIATION MONTH
In forward transaction, the month the contract expires.            

TROY OUNCES
Unit of weight for metals used in the Anglo-Saxon world. 1 ounce = 31.1035 grams.     

SPOT TRANSACTIONS  
Delivery and payment take place within two working days of the conclusion of the contract.  

FORWARD TRANSACTIONS       
Purchase or sale with fulfillment on a predefined future date. Cash Forward - Futures.             

OPTION
Right to purchase or sell according to the means established by the contract, following payment of a premium. The buyer has the right to exercise the option or not, the seller has the obligation to respect that choice (collects the premium).         

ORDER with price limit 
Order issue by a client for a transaction that has to be carried out at a specific price. The order is activated if the market hits that price (or betters it).    

STOP-LOSS ORDER         
An order that will close a position at a loss when the price reaches a specific level. These deals are carried out as best as possible as it cannot be guaranteed that a specific price will be traded if the markets are in rapid movement (as often occurs when many stop-loss orders are activated).          

OTC (Over-the-counter)             
Non regulated market. The non regulated market for gold trades on a continual basis, 24 hours a day, and accounts for the majority of global gold trade. Most non regulated negotiations are regulated using gold kept in London, irrespective of the nation where the transaction takes place.  

OVER BOUGHT                
A term which anticipates a possible downward correction after a violent bullish impulse.          

OVER SOLD
Term which configures the opposite situation to the one above.           

MAKE EVEN
To balance a futures position through the opposite transaction with the same deadline.           

GOLD STANDARD           
Quantity of gold, fixed by law, corresponding to a currency amount.   

Lots in deposit account
An operator in precious metals can keep gold in a deposit account with a client. This gold remains property of the seller until the client withdraws it and pays the prevailing price. Alternatively gold can be held by the operator at a local bank until the clients come for the purchase or delivery.

FINE WEIGHT
Effective weight of the pure metal in an ingot or in an alloy .    

GROSS WEIGHT              
Effective weight of an ingot or a coin, or rather the weight of the precious metal, as well as the weight of other metals in the alloy.        

PLATFORM
Information system that allows financial instruments to be exchanged              

PREMIUM
For options, the price paid to purchase the right to exercise or not the option.               

Gold loan           
Loan mechanism in which gold is borrowed from a bullion bank (which usually has, in turn, borrowed it from one or more central banks), and sold on the market to get cash, usually to finance an extraction operation. The metal is then paid back over an agreed period of time. The interest on the loan is usually paid in dollars or in gold according to the agreement between the counterparts.      

STAMP
Tool used by the founder to mark the surface of the bullion and guarantee the quantity of fine gold they contain. 

PUT
Option which gives the person buying it the right to sell a certain good at an agreed base price and the seller the obligation to accept it at that price. The buyer of the option therefore pays a premium, the seller collects it.

RESISTANCE LINE
The line that circumscribes the upper part of a trend   

BULL
A speculator that foresees a price rise.               

BEAR
Someone who sells short speculating on a fall in prices, hoping therefore to be able to purchase later at a lower price. 

HEDGING REQUEST       
Hedging requested afterwards, when a forward transaction or an option is no longer sufficiently hedged following the price or quotation trend.    

ASSAYER
A professional responsible for subjecting precious metals to purity tests.         

SCRAP
Industrial off-cuts of any type resulting from precious metal processing.           

SHORT
Bearish position for sale of financial stock.         

Long speculative
Dealer that has purchased a forward or futures contract expecting to sell it again at a higher price. 

Short Speculative
Dealer that has sold a forward or futures contract expecting to buy it back again at a lower price.

SPOT
Spot purchase or sale   

SPOT deferred

Forward contract in which contracts can be moved forward as they mature. The delivery dates are specified in the same way as for any non standardized futures contract, but as each contract approaches maturity it can be moved forward using the current interest rates. The benefit however ends within a predefined maximum period of time (a client can, for example, move it forward every three months for ten years). This is called a variable interest rate non standardized futures contract.

Bull State
A speculator that has purchased goods or a bargaining instrument expecting prices to rise and then sells them if the market does not meet his expectations .           

Good delivery Standard (valid transfer)              
The specifications that a gold bullion has to comply with in order to be acceptable in a determined market or Stock Exchange. On the London Bullion Market there is the internationally accredited standard of good delivery. A certified good delivery bullion for London should weigh between 350 and 430 ounces (gold content), with a minimum purity of 99.5% (ninetynine point five). Further specifications can be obtained from LBMA.  

STOP LOSS:       
Sale or purchase order with a defined limit, to guarantee a gain that has already been obtained or to limit a loss.         

STRADDLE
A simultaneous purchase and sale transaction of different goods, either at different due dates or on different markets - arbitration. 

SWAP
Simultaneous purchase and sale transaction for example loco Zurich against loco London, or 995.00 thousandths bullion against 999.90 thousandths bullion or spot against forward.      

SWITCH
Simultaneous transaction of buying or selling the same good but with different due dates.     

TREND 
Space circumscribed by the resistance and support lines between which the price line runs.   

INTRINSIC VALUE
The positive difference between the base price of an option and the current price of the good it refers to.    

VALUE DATE
The day from when interest is due. In forward transactions, the due date.       

SHORT SELLING               
Future selling carried out without owning the good to which it refers. 

VOLATILITY
Indicates the speed and the breadth of the change in price in a determined period.    

WARRANT
A securitized product issued by a specific bank or stock trading body that usually carries the same name as the issuer and gives the buyer the right to buy gold at a certain price on a specific date. Warrants are not very different to options, but the price mechanism is generally simpler. The options are a generic instrument and are not linked in any particular way to a body or institute. Sono uno strumento generico e non sono legate in modo particolare a un ente o un istituto.

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