Explanations of "Gold" investment-related terms A to Z

Nonfarm payroll employment is a key indicator of the labor market, as it represents the total number of paid U.S. workers excluding the farming industry. Usually, when people hear “nonfarm payrolls”, they think about the number provided by the U.S. Bureau of Labor Statistics in the Employment Situation Report published on the first Friday of each month.

Alan Greenspan was born in 1926 in New York City. He received his Ph.D. in economics from New York University in 1977. Before his career at the Fed, Greenspan worked both in private and public sector. In particular, he run Townsend-Greenspan & Co., Inc., a consulting company. He also worked as an adviser for Richard Nixon’s 1968 presidential election campaign and was a Chairman of the Council of Economic Advisers under President Gerald Ford.

In 1987, President Ronald Reagan nominated Greenspan as a successor to Paul Volcker as the Fed Chair. He took office on August the 11th, 1987 and remained in that role until January 31st, 2006, when Ben Bernanke succeeded him. He served five terms through the administrations of four America’s presidents. It was the second-longest tenure in the position (behind William McChesney Martin).

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.

Analyst is an individual whose primary function is a deep examination of a specific subject. Gold analysts study factors influencing the price of gold by various methods and try to predict future moves. Naturally, the best gold analysts are more accurate than other.

The Asian financial 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).

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.

The Austrian School is one of the schools of economic thought. Due to its methodological individualism, it is situated in opposition to the mainstream economics, which is based on large aggregates and mathematical models. The Austrian school was founded in 1871 with the publication of Carl Menger’s Principles of Economics, developing the marginalist revolution in economic analysis. Since it early representatives lived in Vienna, the term ‘Austrian School’ was coined, but its influence spreads across the world.

An Authorized Participant (AP) is usually a large financial institution, like a market maker, which is responsible for obtaining the underlying assets necessary to create and run an ETF. In short, in the case of gold ETFs, it buys gold and delivers it to the ETF provider. In turn, it gets a block of equally-valued (based on NAV) ETF shares, called a ‘creation unit’. The AP may resell these shares for profit. It may also redeem creation units to get the bullion back (only APs can create or redeem ETF’ shares, retail investors can only resell them in the market).

Let’s face it and not fool ourselves. Nobody cares about the economy. What really matters to people is how much they earn. That income we can present either as an annual salary or average hourly earnings. In the US, they are calculated by the BLS as a measure of gross payrolls divided by total hours paid during a given period. As one can see in the chart below, the hourly earnings increased from about $20 in March 2006 to above $27 in November 2018.

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. Gold backwardation means that traders could potentially gain capital (versus simply buying gold right away) when holding gold futures until the contract expires.

We bet that you have heard about bailout (if not, you are welcome to read our take on bailout here). But bailouts are so yesterday - do you know what a bail-in is?

What is the connection between removing water from a sinking vessel using a bucket, paying for someone’s release from jail, and jumping from an airplane with a parachute? Yes, all these activities are referred to by the verb “to bail out”.