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Precious metals investment terms A to Z

Algorithmic trading

Algorithmic trading, used mostly by institutional investors and large hedge funds, utilizes advanced mathematical tools developed by traders to forecast the most probable moves in the markets, and to initiate trades.

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Analyst

Analyst is an individual whose primary function is a deep examination of a specific subject. Precious metals analysts study factors influencing the price of precious metals by various methods and try to predict future moves. Some are more accurate than other.

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Asian fiancial crisis

The Asian fiancial crisis in the late 1990s with devaluation of local currencies caused unexpected havoc in global markets, with a domino effect, including a crisis in Russia, declines in stock markets around the world, and the fall and bailout of the U.S. hedge fund Long Term Capital Management (LTCM).

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Asset swap

Asset swaps are seen to be both cash market instruments and credit derivatives in the financial markets. They are similar in structure to plain vanilla swaps and the difference between the two instruments is in the underlying swap contract. Plain vanilla swaps exchange fixed and floating interest rate products whereas asset swaps exchange fixed rate investments such as bonds which pay a guaranteed coupon rate with floating rate investments such as an index. Asset swaps are used to alter the cash flow profile of a bond.

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Backwardation

Backwardation is a phenomenon seen in the futures market, which futures traders need to monitor. A forward curve is said to be in backwardation when futures are traded at a discount in comparison with spot.

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Balance Of Payments

The Balance Of Payments is a government produced financial measure relating to a period of time which accounts in financial terms for the difference between the value of all the country’s imports and its exports. It is an important measure of a country’s relative performance in the global economy.

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Bear market

A bear market refers to a decline in prices, usually for an extended period, in a single security or asset, group of securities or the securities market as a whole. Its opposite is a bull market where prices are rising.

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Bid-ask spread

The bid-ask spread is the difference between the price quoted by investors who want to sell a certain stock or asset (ask price) and those who wish to buy it (bid price). The higher the spread the less liquidity in the market for the asset.

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Bretton Woods Agreement

The Bretton Woods Agreement emerged from an economic conference held in Bretton Woods, New Hampshire in the United States, during the first three weeks of July 1944.

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BRIC

BRIC is the acronym for Brazil, Russia, India, and China. The term was specifically coined to refer to these fast-growing emerging economies and by implication, their mutual benefits by forming alliances with each other.

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Bull market

A bull market is characterized by optimism, investor confidence and expectations that prices will tend to go up. During a bull market in stocks prices are expected to rise even after severe declines. In the precious metals market, however, the situation is quite different. Bear markets can last for a long time and there is no confidence that serious slumps will be followed by periods of recovery.

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Bullion

Bullion is the general name for pure gold or silver (at least 99.5%) which have been transformed into bars or minted into coins for investment purposes.

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Bullish Divergence

A bullish divergence between the price and a technical indicator is a moderately useful tool for detecting a coming reversal in the bearish trend.

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Buoyant Market

In commodity space, buoyant market is generally coined with a market where prices rise with ease when there are sufficient signals of strength

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Call Options

A derivative that provides you with leverage during rallies, while limiting your risk. The catch is that you have to be right on time.

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