gold investment, silver investment

Precious metals investment terms A to Z

GATA - Gold Anti-Trust Action Committee

GATA is an organization whose aim is to investigate, expose and oppose collusion in the price of gold and related financial instruments.

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GDP (Gross Domestic Product)

The gross domestic product (GDP) is the monetary value of all finished goods and services produced within a country in a specific time period. It is also the most common measure of a nation’s overall economic activity or the size of the economy. It is released quarterly by the Bureau of Economic Analysis.

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Geographical diversification

Geographical diversification is the practice of diversifying an investment portfolio across different geographic regions in order to reduce the overall risk and improve returns.

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Geopolitical Risk

Geopolitics is a study of the influence of such factors as geography, economics, and demography on policy, particularly on the foreign policy of a state. Geopolitical risk is commonly defined as the risk of one country’s foreign policy influencing or upsetting domestic political and social policy in another country or region, but its scope is much wider. Geopolitical concerns include military conflicts, civil wars, terrorist’s attacks, riots, sanctions etc. (some also mention epidemics, cyber attacks, country defaults etc.)

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Germany and Gold

The world’s fourth largest economy by nominal GDP, and the fifth largest by purchasing power parity. The third largest exporter of goods in the world and the richest country in Europe. The country famous for automotive industry, great culture and excellent beer. Germany. What are its links to the gold market?

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Gold Analysis

How to analyze the gold market? Oh boy, this is not a piece of cake. There are many factors the analyst should take into account. But the most important thing is to have an appropriate theory of the gold market. As the saying goes, there is nothing more practical than a good theory!

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Gold as an Element

Chemically, gold is an element with the symbol Au and atomic number 79. It belongs to noble metals and is a unique element. First of all, it is extremely rare. In the Earth’s crust, gold occurs 19 times less frequently than silver and 15 thousand times less frequently than copper. It is the only metal being yellow with a high luster, to which it owes its Latin name ‘aurum’, meaning “shining dawn.”

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Gold as an Investment

Gold had served as money for thousands of years until 1971 when the gold standard was abandoned for a fiat currency system. Since that time, gold has been used as an investment. Gold is often classified as a commodity; however, it behaves more like a currency. The yellow metal is very weakly correlated with other commodities and is less used in the industry. Unlike national currencies, the yellow metal is not tied to any particular country. Gold is a global monetary asset and its price reflects the global sentiment, however, it is mostly influenced by the U.S. macroeconomic conditions.

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Gold Demand

The price of gold, as each price, is determined by the market forces of demand and supply. The demand is the amount of a good demanded for purchase at a given price. Therefore, the demand for gold is the amount of a gold demanded for purchase at a given price. Gold demand is often analyzed on an annual basis and divided into jewelry demand, technology demand, central banks’ demand or investment demand.

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Gold Forward Offered Rate (GOFO)

The Gold Forward Offered Rate (GOFO) is the swap rate for a gold-to-U.S. dollar exchange. It is not the price to lease gold but rather the price to swap gold for U.S. dollars. In other words, it is a rate at which someone is ready to exchange gold for the greenback. You can think of GOFO as the interest rate on a U.S. dollar loan secured by gold as collateral. Since a swap can be described as a series of forward contracts, the Gold Forward Offered Rate resembles the gold forward rate and may be interpreted as the difference between the U.S. dollar interest rate (LIBOR) and the gold lease rate (GLR).

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Gold Forwards and Swaps

In the gold market, there are many derivatives available for investors who want to hedge or speculate. They may use gold futures which are quoted on exchanges (like Comex). In the over-the-counter market, gold forwards and swaps are traded instead.

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Gold Hedge Fund

Some hedge funds specialize in the gold market and in this case, one can benefit from both: gold's price gains, and portfolio manager's abilities. Naturally, there are some drawbacks as well, such as the fee that the fund charges.

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Gold Inventory

What is gold inventory? Well, inventory usually means goods available for sale or raw materials used to produce these goods. In other words, it is the goods and materials that companies hold for the ultimate goal of resale. Hence, we could say that all gold held by jewelers, dentists and technology companies is gold inventory. The same applies to gold coins or gold bars held by bullion dealers.

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Gold Lease Rate (GLR)

The gold lease rate (GLR) is the cost of borrowing gold. Yes, you heard correctly. Gold may be lent and borrowed, just like any other asset or currency. Therefore, contrary to common opinions (Warrant Buffet is perhaps the most famous representative of such beliefs), gold may have a yield and may bear interest. Some entities operating in the wholesale gold market do lend gold and earn interest on such transactions. They are usually referred to as lease transactions and the interest rate applied to such lending is called the gold lease rate.

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Gold Manipulation

Gold market manipulation, called also gold price manipulation, can be defined broadly as a purposeful effort to control gold prices. This sort of manipulation exists in financial markets as traders try to influence the markets (in this case, the gold market). It may be responsible for some short-term aberrations in asset prices, including the price of gold. However, there is another, more specific definition. According to the U.S. Securities and Exchange Commission, manipulation is intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security… [This includes] rigging quotes, prices or trades to create a false or deceptive picture of the demand for a security. A popular belief within the gold investing community is that gold prices are manipulated, generally downwards, in what is described as price suppression.

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