Precious metals investment terms A to Z
A rally is a period during which prices in the financial markets go up. Rallies tend to be of shorter duration-- days, weeks or months -- than bull markets, which can last for years.Read more
- Real Interest Rates
Interest rates quoted in the markets are nominal, so one typically has to adjust them for inflation. Inflation determines the difference between nominal and real interest rates. Nominal interest rates are before taking inflation into account, while real rates are nominal rates adjusted for inflation. As there are several inflation indices (and many maturities), there are many measures of real interest rates. However, analysts often use yields on Treasury Inflation Protected Securities (TIPS), which are indexed to inflation (CPI) and their par value rises with inflation, as a proxy for real interest rates. Investors should remember that real interest rates are much more important for the gold market than changes in nominal interest rates, including the federal funds rate.Read more
- Redemption Mechanism
A redemption mechanism (also called a creation/redemption mechanism) is deployed by market makers to ensure the price of an ETF does not fluctuate too far away from its NAV.Read more
- Resistance level
Resistance level is a key concept in Technical Analysis that is very helpful in determining the right moment to sell in an uptrend or to sell short in a downtrend.Read more
- Reverse Head and Shoulders Formation
The reverse head and shoulders formation (also known as inverse head and shoulders formation) is one of the most popular and reliable formations used in technical analysis. As the name suggests, it has a shape similar to the head and shoulder. This head and shoulders bottom pattern usually signals a change in price trend. When it occurs the security is likely to move against the previous downtrend.Read more
- Risk Premium
The term “risk premium” refers to the difference between the higher interest rates that riskier investments must pay to attract investors and the interest rate of the risk-free investment. Thus, it is the return in excess of the risk-free rate of return than an investment is expected to yield. It is a compensation for investors to bear more risk and hold the risky asset rather than the risk-free asset. The risk premium is positive, since people are generally risk averse, i.e. they dislike risk. The risk premium explains why, for example, stocks have higher expected returns than a bank account or Treasury bonds.Read more
- RSI Indicator
The Relative Strength Index (RSI) is one of the most popular technical indicators that can help you determine overbought and oversold price levels as well as generate buy and sell signals. RSI has proven to be quite useful for.
RSI was developed by J. Welles Wilder, Jr. and published in a 1978 book, New Concepts in Technical Trading Systems, and in Commodities magazine (now Futures magazine) in the June 1978 issue. It is a momentum oscillator and as such it measures the rate of change of a given security’s price. Since it is also a bounded oscillator, it allows to spot overbought and oversold areas on the price chart.Read more
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