Glossary of Bullion Terms

A

Allocated bullion or storage

Bullion products that are owned by an investor and stored in a professional vault, under an arrangement. The bullion products (typically bars or coins) are allocated to a specific account and are uniquely identified.

Ask or offer (price)

The price at which a dealer is willing to sell a particular commodity.

Assay

The testing of gold or silver to determine its fineness or purity.

B

Backwardation

A market condition where the spot price for a commodity is seen to be higher than the futures price (historically occurs in markets with supply shortages). The opposite is a ‘Contango’ market.

Bear market

A market condition where prices of stocks or other commodities are expected to decline in the near future (historically occurs during a recession). The opposite is the ‘Bull’ market.

Bid (price)

The price at which a dealer is willing to buy a particular commodity. ‘Bear’ market.

Bullion

General term used to describe bars and coins made of precious metals like gold, silver, platinum and palladium. They are coveted for their investment quality, often produced in bulk and required to meet certain international standards for weight and purity, among others. 

Bullion coins

Contemporary precious metal coins minted by official agencies in undetermined numbers for investment purposes. A legal tender coin whose market price depends on its gold content, rather than its rarity or face value. 

Bull market

A market condition in which prices are expected to rise in the near future (historically occurs during economic recovery). The opposite is the ‘Bear’ market.

C

Commodity

A physical product or good which is commonly traded and holds value based on its industrial and commercial value.

Note: A finished product like a bullion coin or bar is not a commodity, in and of itself; however, the gold or silver from which it’s made is. 

Contango or forwardation

A market condition where the spot price for a commodity is seen to be lower than the futures price.  The opposite is a ‘Backwardation’ market.

Correction

A movement in the price of a commodity after a continuous movement in the opposite direction. For example, when the prices in a market constantly rise and then decline.

D

Divisibility

How easy it is to piece out and distribute a fixed weight of a certain product.

Doré bar

A bar composed of an impure alloy of precious metals. For example, a gold doré bar is mostly made of gold with a lower percentage of silver. These bars are generally produced by the mine where the metal was sourced and sent to a refinery for further purification. 

E

Exchange-traded fund (ETF) or product

A type of investment that trades on an exchange. It is similar to a mutual fund in that it contains a collection of different investments (e.g. stocks, commodities, bonds, etc.); however, because it trades like a stock, the price of an ETF will fluctuation.

Exchange-traded receipt (ETR)

The Royal Canadian Mint’s Gold and Silver Reserves Exchange-Traded Receipts are a type of investment that trades on the Toronto Stock Exchange (TSX). It provides investors with direct ownership in physical gold or silver that is stored in the secure facilities of the Mint.

F

Fiat money

Paper money that is used as legal tender in a country, though it’s not backed by gold or silver.

Fineness

The purity of a precious metal measured in 1,000 parts of an alloy: a gold bar of .995 fineness contains 995 parts gold and 5 parts of another metal. For example: a Canadian Maple Leaf has a fineness of .9999, meaning that it is 99.99% pure.

Fine gold

The purity of a gold coin or bullion piece. Pure gold is rated as 24 karats or .999 fine gold.

Fine ounce

A troy ounce with a minimum precious metal content of 99.5% pure (minimum fineness of .995). While the LBMA standard for a fine ounce is 99.5%, our standard for a fine ounce of either gold or silver is 99.99% (minimum fineness of .9999).

Fine silver

The purity of a silver coin or bullion piece. Pure silver has a .999 fineness or higher.

Fine weight

The weight of gold or silver contained in a bar, coin or bullion as determined by multiplying the gross weight by the fineness.

Fix price

A bullion pricing standard which is set every day by the members of the LBMA in London. It serves an international benchmark price for that moment in time and is changed in twice daily for gold and one for silver.

G

Gross weight

The actual weight of a coin, round or bar.

H

Hallmark

An official mark (or series of) on a precious metal surface to show the purity and later the producer and serial number.

Hedge or hedging

An offsetting transaction (either purchase or sale of an option or future contract) designed to protect from or minimize the impact of unfavorable movements in the assets’ value.

K

Karat

A measure of the proportion of gold in a gold alloy product, on the basis that 24 karats is pure gold. This scale indicates the measurement of purity in gold, from 1 to 24. For example, 10 K (or 10 k) of gold is 10/24 or roughly 41.7% pure gold.

L

LBMA

The London Bullion Market Association. Formally incorporated 1987 to represent the interests of the participants in the wholesale bullion market.

LBMA good delivery lists

Lists of acceptable refiners of gold and silver whose bars meet the required standard (of fineness, weight, marks and appearance) of the London Bullion Market Association.

Liquidity

The ease of buying and selling a certain asset. 

M

Market value

The price at which an item trades.

Melt value

The value of precious metal that could be extracted from a product if it were to be melted down. For example, if a coin containing one ounce of silver was melted down and the silver spot price was $20 at that time, then the melt value of that coin is $20. 

P

Paper precious metals

Any precious metal investment that does not result in the investor holding physical gold or silver, for example. Examples include precious metal ETFs, precious metal certificates, etc.

Physical market

A marketplace where physical products like bullion are traded. This is opposite of the futures market, where the physical transfer of goods might not happen because only contracts are traded.

Precious metals

Metals of great value being gold, silver, platinum and other platinum group metals.

Premium or mark-up

The additional cost for which bullion sells over its bullion value. It represents the cost of distribution, fabrication, and a dealer fee. In general, the premium paid on a small bullion bar or coin is higher than on a large bar.

R

Refining

The separating and purifying of precious metals (e.g. gold or silver) from other metals.

Rounds

A non-government issued bullion piece or medal.

S

Scrap gold

The broad term for any gold which is sent back to a refiner or processor for recycling.

Spot price

Used in commodities trading to denote the live price at which an asset (in an unfabricated form) can be bought or sold for immediate delivered. The spot price is the price required for immediate settlement.

Spread

The difference between the selling price and the buying price of a commodity or other trading unit.

T

Troy ounce

The traditional unit of weight that equates to 1.09711 avoirdupois ounce. One troy ounce is a common standard of measurement for precious metals and a standard for pricing and trading bullion. One troy ounce is equivalent to 31.1035 grams, 490 grains or 1.09711 avoirdupois ounces.

U

Unallocated bullion or storage

Bullion products that are owned by investors and stored in a professional vault, under an arrangement, but are not allocated to a specific account. The owner holds only the account balance reflected in ounces and not specific or uniquely identified products.