Precious metals investment terms A to Z

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R-squared

R-squared is a statistical measure of how well a statistical model (it may be just a line) fits the data. It is also known as the coefficient of determination, and denoted as R2 or r2. To be more specific, R-squared is the percentage of the variability of the data that is explained by the model (i.e., it is the explained variation divided by the total variation). In simple words, R2 shows how much of the changes in one thing (like the prices of gold stocks) can be explained by changes in another thing (like the price of gold). R-squared is always between 0 and 100 percent, where the higher the-R squared, the better the model fits the data. An R2 of 1 indicates that the model (it may be a simple regression line) perfectly fits the data, while an R2 of 0 means that the model does not fit the data at all.

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Rally

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. For instance, a rally in gold might be gold's upswing that remains in place for a week or a month, while an upswing that lasts a decade would be called a bull market.

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Real Income

GDP? Industrial production? Yield curve? Who cares? At the end of the day, what really matters is how much money you bring home. Or, to be more precise, how much real stuff you can buy for money that inflows your bank account each month. This is what we call real income – it’s income adjusted for inflation. We make this correction to measure the amount of goods and services individuals can purchase. For example, if one’s salary increased 2 percent over the year, but inflation was 3 percent, the real income of that person actually decreased by about 1 percent. Hence, real income is a more useful indicator of people’s well-being than nominal income.

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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 represent rates 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.

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Recession

A donkey walks into a bar. “Where’s the horse?” asks the barman. “Recession,” says the donkey.

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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.

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Reflation

Have you ever slept on an air mattress? If yes, you probably noticed that the mattress deflated overnight. It lost air, you couldn’t sleep, so you had to get up and reflate the mattress in the middle of the night, waking up all around.

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Registered Gold

Comex has several warehouses for metals (as investors may take delivery), which contain lots of gold. The bullion held in these warehouses is divided into two categories: eligible gold and registered gold.

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Relative Gold

Relative gold (a.k.a. rgold, r-gold, relgold, or rel-gold) is a term used to describe the price of gold in relation to the moving average of this price. One concrete formulation of relative gold is as a ratio of the current price of gold to the 200-day moving average of this price. Specific values of this ratio could then be used to find signs for the gold market.

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Relative Silver

Relative silver (a.k.a. rsilver, r-silver, relsilver, or rel-silver) is a term used to describe the price of silver in relation to the moving average of this price. One concrete formulation of relative silver is as a ratio of the current price of silver to the 200-day moving average of this price. Specific values of this ratio could then be used to find signs for the silver market.

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Repo Operations

We bet that you have heard about the 2019 repo crisis. On September 17, 2019, the repo interest rate more than doubled, as the chart below shows. That crash prompted the Fed to pump $500 billion into the repo market since the repo crisis started.

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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. In other words, if gold is rallying and it's moving toward a price level at which it reversed several times in the past, we can say that it's gold resistance level.

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Retail Sales

Retail sales are an aggregated measure of sales of retail goods over a stated time period. The report is published monthly (about two weeks after the month-end) by the Census Bureau and the Department of Commerce.

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Reversal

A reversal is a change in the direction in which an asset is going. Reversals can be extremely important for gold and silver investors and traders s they might signify a change in the current trend. At the same time, the analysis of reversals is not limited to price itself. The reversals can take the form of a shooting star candlestick, but there are also other ways in which the price can reverse. Most of them, however, are confirmed by high volume readings.

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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.

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