gold investment, silver investment

Precious metals investment terms A to Z

Fed

The Federal Reserve System, or sometimes referred to as “the Fed” is the central bank of the United States. The agency was created through the House Resolution 7883 by Rep. Carter Glass and it came into effect on December 23, 1913 after President Woodrow Wilson signed the Federal Reserve Act. The Fed is entrusted with the responsibility of ensuring that the country will have a safer, more stable, and flexible financial and monetary system.

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Federal Debt

The United States is a federation of individual states which have the Federal Government to oversee them and run the affairs of the overall federation or country. Thus the Federal Debt is the amount owed by the United States government to various creditors.

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Federal Funds Rate

The federal funds rate is an interest rate at which depository institutions lend balances (funds maintained at the Federal Reserve) to each other overnight. When one bank has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity.

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Fed’s Balance Sheet

The balance sheet of the Federal Reserve is a statement which summarizes the assets and liabilities of the Fed. It looks like a standard, commercial balance sheet with one important difference: the Fed is able to expand its balance sheet by printing as many U.S. dollars as it wants. Therefore, anything for which the Fed has to pay money (usually U.S. Treasuries), becomes the Fed's asset. The Fed’s liabilities (like U.S. dollar bills) are also interesting, since U.S. dollars are not redeemable in gold, but in other U.S. dollars.

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Fiat Money

Fiat money is a currency that a government has declared to be legal tender, but is not backed by a physical commodity. The term derives from the Latin fiat (“it shall be” or “let it be done”) as fiat money did not spontaneously emerge in the free market, but it was established by government regulation or law. Contrary to commodity money, which is money that is at the same time a commercial commodity, fiat money is a legal claim, which derives all its properties from the law. It is neither a commercial commodity, nor a title to any such commodity, so it is irredeemable paper money without any intrinsic value.

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Fibonacci Retracement

Fibonacci retracement levels are a useful tool that can help you determine how much of a move in a given part of the main trend will retrace before that trend is resumed. Fibonacci retracements have been very useful in gold, silver and mining stocks as well as currency markets.

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Fiscal Deficit

Fiscal Deficit arises when a government’s annual expenditure exceeds its annual revenues (excluding money received from new borrowings).

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Fixed Exchange Rate

Almost every sovereign nation in the world issues and controls its own currency. There are some countries which have elected to use another country’s currency, primarily the United States Dollar. Sovereign currencies are the legal tender within their respective countries. The need for exchange rates between sovereign currencies has arisen as international trade has spread and flourished.

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Floating Exchange Rate

Almost every sovereign nation in the world issues and controls its own currency. There are some countries which have elected to use another country’s currency, primarily the United States Dollar. Sovereign currencies are the legal tender within their respective countries. The need for exchange rates between sovereign currencies has arisen as international trade has spread and flourished.

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FOMC (The Federal Open Market Committee)

The Federal Open Market Committee (FOMC) is the policy making branch of the Federal Reserve Bank in the United States. It conducts eight meetings per year to analyze the current market and make decisions based on the findings. The decision made by the FOMC will have a direct consequence on the funds held by the Fed, causing ripple effects on the market. The decisions by this committee are eagerly awaited by the financial industry.

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Forced Liquidation

Forced Liquidation is the situation where open positions are offset by the brokerage firm holding the account, usually after warnings have been issued that the account is under-margined due to adverse price movements and failure to meet margin calls. Traders are always concerned of forced liquidation because it rebalances the portfolio to reduce the excess market risk under adverse market conditions. The broker has the right to offset the positions if the account holder chooses not to meet the margin requirements.

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Forex

The foreign exchange (forex) market is an over-the-counter currency trading market that allows buyers and sellers to trade foreign currencies. The Forex market is the most liquid in the world with an average traded value of $1.9 trillion per day. The Forex market is operational 24 hours a day and five days a week. Individuals from all over the world can trade freely through forex trading.

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Fractal

From a precious metals investor’s point of view, fractals are complicated structures of prices of metals (for instance, charts of prices of metals). The complexity of these structures (charts) can be described by a mathematical measure – the fractal dimensionFractalyzer - one of our investment tools - takes into account fractals on the precious metals market while projecting future price paths.

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Fractal Dimension

A measure of the complexity of data. What is particularly interesting for precious metals investors, a fractal dimension can measure the complexity of price paths (or charts of prices) of metals. The higher the fractal dimension is the more complicated the price paths (charts) are. Fractal dimension is one of the things that Fractalyzer's fractal index is based on.

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Fractional-Reserve Banking

Fractional-reserve banking is a banking system (currently practiced in most countries worldwide) in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. In other words, contrary to full-reserve banking, only a fraction of a bank’s demand deposits are kept in reserve and available for immediate withdrawal. Therefore, when you deposit $100, the bank will keep only a small fraction of your money in reserve and lend out the rest of your money. It implies that fractional-reserve banking expands credit and money supply beyond the amount of the underlying reserves of base money originally created by the central bank. The proponents of this system argue that fractional reserve banking allows for capital investment and economic growth in excess of what a full-reserve system would allow. The opponents believe that the fractional-reserve banking causes macroeconomic instability.

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