Glossary

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

A

Actuals - Physical cash commodities as opposed to futures contracts.

Ag - See “Argent”

Alloy - Mixture of more than one element, generally metallic, which is more useful than either metal on its own.

Amaglam - Mixture of silver (or other metal) with mercury. Major use is in dentistry.

Approved Carriers - Armored carriers approved by an Exchange for the transportation of silver, gold, platinum, and palladium.

Argent - French word for both silver and money. Argentum in Latin. Its abbreviation Ag is used as the chemical symbol for silver.

Ask - A motion to sell. The same as offer. The Ask price is the price at which a dealer offers to sell a commodity.

Assay - To test a metal for purity or quality.

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B

Backwardation - Market situation in which futures prices are lower in each succeeding delivery month. Also known as an inverted market. The opposite of contango.

Bactericides - Materials that kill bacteria, such as silver salts.

Base Metal - Copper, aluminum, iron, lead, nickel, tin and zinc.

Basis - The differential that exists at any time between the cash, or spot, price of a given commodity and the price of the nearest futures contract for the same or a related commodity. Basis may reflect different time periods, product forms, qualities, or locations. Cash minus futures equals basis.

Bear Market - Market in which prices are in a declining trend.

Bid - A motion to buy a commodity at a specified price. Opposite of offer. The Bid price is the price at which a dealer offers to buy a commodity.

Bullion - Precious metals that are traded based on their intrinsic metal value. Bullion may be in the form of bars, plates, ingots and coin.

Bullion Coin - A precious metal coin whose market value is determined by its inherent precious metal content. They are bought and sold mainly for investment purposes.

Bull Market - Market in which prices are in an upward trend.

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C

Carry Market - A market situation in which prices are higher in the succeeding delivery months than in the nearest delivery month. Also known as contango, it is the opposite of backwardation.

Carrying Charge - The total cost of storing a physical commodity over a period of time. Includes storage charges, insurance, interest, and opportunity costs.

Cash Commodity - The actual physical commodity. Sometimes called a spot commodity or actuals.

Cash Market - The market for a cash commodity where the actual physical product is traded.

Central Bank - A national bank that operates to establish monetary and fiscal policy, and to control the money supply and interest rates. In the United States, the Federal Reserve Board is often referred to as the central bank.

Close - A period defined by an exchange and occurring at the end of each trading session wherein any transactions are considered to be made “at the close.”

Commission - The fee charged by a broker for the execution of an order.

Commodity Futures Trading Commission (CFTC) - A federal regulatory agency authorized under the Commodity Futures Trading Commission Act of 1974 to regulate futures trading in all commodities. The commission has five commissioners, one of whom is designated as chairman, all appointed by the President, subject to Senate confirmation. The CFTC is independent of the Cabinet departments.

Contango - A market situation in which prices are higher in the succeeding delivery months than in the nearest delivery month. Also known as a carry market, it is the opposite of backwardation.

Current Delivery Month - The futures contract which ceases trading and becomes deliverable during the present month or the month closest to delivery. Also called the spot month.

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D

Deliverable Bar - A precious metals bar with a weight, fineness and hallmark approved as a tradable unit on a commodity exchange.

Delivery - Delivery generally refers to the change of ownership or control of a commodity under specific terms and procedures established by the Exchange upon which the contract is traded. Typically, except for energy, the commodity must be placed in an approved warehouse, depository, or other storage facility, and be inspected by approved personnel, after which the facility issues a warehouse receipt, shipping certificate, demand certificate, or due bill, which becomes a transferable delivery instrument. Delivery of the instrument usually is preceded by a notice of intention to deliver.

Delivery Point - A location designated by an exchange at which delivery may be made in fulfillment of contract terms.

Depository or Warehouse Receipt - A document issued by a depository institution indicating ownership of a commodity stored in a vault or warehouse. In the case of many commodities deliverable against futures contracts, transfer of ownership of an appropriate depository receipt may affect contract delivery.

Derivative - Financial instrument derived from a cash market commodity, futures contract, or other financial instrument. Derivatives can be traded on regulated exchange markets or over-the-counter. For example, futures contracts are derivatives of physical commodities, options on futures are derivatives of futures contracts.

Dore Bullion - An impure alloy of silver or gold produced at a mine.

Ductility - An ability to change shape drastically without breaking. The capacity of a metal to be hammered into a thin sheet or drawn into a fine wire.

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E

Exchange of Futures for Physicals (EFP) - A futures contract provision involving an agreement for delivery of physical product that does not necessarily conform to contract specifications in all terms from one market participant to another and a concomitant assumption of equal and opposite futures positions by the same participants at the time of the agreement.

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F

Face Value - The monetary value worth of a coin. This does not necessarily correspoind to its actual worth. For example, a pre-1965 U.S. half dollar has a face value of $0.50 but its intrinsic value is tied to the price of silver and much higher.

Fineness - The purity of precious metal measured in parts per thousand.

Fine Weight - The weight of precious metal contained in a coin or bullion as determined by multiplying the gross weight by the fineness.

Fine Silver - Pure silver. Generally 99.9% pure.

Fungible - Interchangeable. Products that can be substituted for purposes of shipment or storage.

Futures Contract - A contract between a buyer and seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide future delivery of a fixed amount of a commodity at a predetermined price at a specified location. Futures contracts are most often liquidated prior to the delivery date and are generally used as a financial risk management and investment tool rather than for supply purposes. These contracts are traded exclusively on regulated exchanges and are settled daily based on their current value in the marketplace.

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G

Gold/Silver Ratio - The number of ounces of silver required to buy one ounce of gold at current spot prices.

Good Delivery - Approved metals brands acceptable for delivery against the metals contracts.

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H

Hallmark - A stamped impression on the surface of a precious metals bar that indicates the producer, serial number, weight, and purity of metal content.

Hedge - The initiation of a position in a futures or options market that is intended as a temporary substitute for the sale or purchase of the actual commodity. For example: the sale of futures contracts in anticipation of future sales of cash commodities as a protection against possible price declines, or the purchase of futures contracts in anticipation of future purchases of cash commodities as a protection against the possibility of increasing costs.

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I

Intrinsic Value - The actual value of the precious metals contained within a bullion bar or coin.

Inverted Market - A futures market is said to be inverted when distant contract months are selling at a discount to nearby contract months; also known as backwardation.

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K

Karat - A measure of the purity of gold. Pure gold is 24-karat.

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L

Legal Tender - Coins that have been authorized by Congress. This includes circulating coins and all commemorative coins legislated by Congress.

Licensed Warehouse - Warehouse that has been approved for the storage of silver or gold deliverable against a silver or gold futures contracts.

Licensed Weighmaster - An organization approved by an exchange to witness and verify the weighing of silver or gold delivered against a silver or gold futures contract.

Liquid Market - A market characterized by the ability to buy and sell with relative ease.

London Fix - Price set each day in London by five old-line firms. The “fixing price” reflects the price at which buy and sell orders from the firms’ customers’ are in balance. The London Fix is an internationally recognized benchmark price for that particular moment in time.

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M

Malleable - Having the property of being deprived of form, accepting deformation under pressure or hammering without rupture or fracture.

Market Value - The total price of a bullion bar or coin inclusive of intrinsic value and any premium or discount.

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N

National Futures Association (NFA) - Futures industry trade association which promulgates rules of conduct and mediates disputes between customers and brokers.

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O

Offer - A motion to sell a commodity at a specified price. Opposite of bid. The Offer price is the price at which a dealer offers to sell a commodity.

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P

Premium - The market value of a coin less the intrinsic value of its metal content. A coin that contains $6.00 of silver (intrinsic value) and sells for $7.50 (market value) has a $1.50 premium.

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S

Securities and Exchange Commission (SEC) - An independent agency that administers federal securities laws and regulates the firms that buy and sell those securities.

Settlement Price - The price established by the Exchange settlement committee at the close of each trading session as the official price to be used by the clearinghouse in determining net gains or losses, margin requirements, and the next day’s price limits. The term “settlement price” is often used as an approximate equivalent to the term “closing price.” The close in futures trading refers to a brief period at the end of the day, during which transactions frequently take place quickly and at a range of prices immediately before the bell. Therefore, there frequently is no single closing price, but a range of prices. In months with significant activity, the settlement price is derived by calculating the weighted average of the prices at which trades were conducted during that period.

Spot - Term which describes one-time open market cash transaction, where a commodity is purchased “on the spot” at current market rates. Spot transactions are in contrast to term sales, which specify a steady supply of product over a period of time.

Spot Market - A market of immediate delivery of product and immediate payment.

Spot Month - The futures contract closest to maturity. The nearby delivery month.

Spread - The difference between the bid price and the ask price of a bullion bar or coin.

Sterling Silver - Silver of a fineness of 92.5%.

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T

Troy Ounce - A unit weight, equal to 1.09711 avoirdupois ounces. The troy ounce is the traditional unit weight for precious metals, believed to be named after a weight used at the annual fair at Troyes in France in the Middle Ages.

1 ounce Troy = 480 grains = 31.1035 grams

1,000 grams = 1 kilogram = 32.15 ounces Troy

1,000 kilograms = 1 metric ton = 32,150 ounces Troy

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