For those interested in getting started in gold investing, the market can appear labyrinthine. The sheer amount of terminology can be overwhelming. In order to make this process easier and to provide a quick reference we have put together a glossary of key gold investment terms.
Alloy
A blending of a metal and other substances, but most commonly other metals. The alloy will have a combination of the traits of its component materials. For instance steel is an alloy of iron and carbon. The vast majority of gold coins are at least some form of alloy, with a small percentage of them being mixed with silver or copper.
Arbitrage
The process of actually selling the gold by working different markets in order to take advantage of the difference in price. For instance you might buy the gold in US dollars and then sell the gold for British pound sterling, and then use the foreign exchange market to convert the pounds back to dollars.
Argentum
Latin word for silver. The chemical abbreviation for silver is Ag.
Ask
The price of the gold according to the dealer.
Assay
In order to guarantee the purity of a gold coin when minted, a series of tests are carried out by the appropriate independent authority. This can take the form of the more traditional and time consuming Fire Gold Assaying or X-Ray Fluorescence Gold Assaying (XRF). XRF Assaying is faster and does not require a physical sample of the gold to be removed, making it non-destructive. After the tests are complete, the owner is given a certificate detailing the purity of the metal.
Aurum
Latin word for gold. The chemical abbreviation for gold is Au.
Avoirdupois
Widely used in English speaking nations, in particular the US and UK to measure the weight of solid objects, based on a pound of 16 ounces or 7,000 grains. Importantly it is not used for gold or precious metals.
Base Metal
A commonly available metal that is not considered precious but is frequently used in alloys such as tin, copper and zinc.
Brilliant Uncirculated (BU)
Used to describe a coin that is in mint condition, or as new as can possibly be.
Bullion
Any bar of precious metal, such as gold, silver, platinum that is at least 95.5% pure.
Bullion Coin
A coin, made of precious metals, that is not used as a currency and instead stems its value from the intrinsic nature of its manufacture and materials. When used in reference to coins, they must closely follow spot prices and have little numismatic value.
Carat
See the entry for Karat.
Cash Production Cost
The general costs associated with the mining, milling, refining and other expenses related to the direct production of the gold. It does not include any taxes or other indirect costs.
Certificate
Most gold is not held personally by the owner. Instead the bank or bullion dealer will provide a certificate that acts as the legal token of ownership. The gold is held in a secure location within a bank or HMRC facility. This allows the owner to not have to worry about security issues and increases their liquidity due to the ease at which ownership of the gold can be transferred.
Coin of the Realm
Any coin released by a government that is considered legal tender.
Commemorative Coin
The coins are minted in order to remember a certain special event or person. These coins can be minted either for currency circulation or just for collectors.
Depository
Large scale storage facilities, similar to vaults which focus on the safe storage of precious metals. Normally they have a wide range of partnerships with precious metal dealerships, banks, financial exchanges and shipping companies allowing for the easy transfer of ownership.
Derivative
Is a contract set in the future for the monetary value of a commodity, but not for the commodity itself. In gold investing, this most commonly takes the form of a gold option.
Device
The primary design found on the coin, depicting a particular insignia, coat of arms or notable person.
Ductility
The ability for a material to be worked out of shape without breaking. For instance metal that is spun into wire would have a high level of ductility. Gold is famed for its ductile properties.
Edge
Neither the obverse or reverse, this is third side of the coin spanning its circumference. This section may be lettered or have a variety of patterns.
Face Value
When a coin is minted for currency a valuation is stamped upon it, representing the face value. Thus the face value of a standard sterling pound coin is £1 GBP.
Fiat Money
Any cash that is not backed by gold or silver, but still considered legal tender. This includes the majority of modern currencies including the US dollar, British pound sterling, Euro and Indian rupee.
Field
The blank part of the coin behind the inscription or design, forming the background.
Fineness
A measure of the purity of a precious metal. In order to do this, one must imagine the alloy is broken down into 1,000 parts, then you would measure how many of the parts would be of each different substance. For instance a gold coin with a fineness number of 0.499, would mean that of those 1,000 parts, 499 of them would be gold. The purest gold is 0.999 fineness which is 24 karat.
Fine Weight
Is the measure of the actual precious metal content of the content, rather than the gross weight of the coin as a whole with all of its alloyed components.
Forward Transaction
Two parties agree to facilitate the sale of gold between them, similar to a futures contract, but without the regulations and procedures that govern futures.
Four Nines
The purest gold attainable, standing at 99.99%. Also equates to 24 karat gold. Previously unattainable, but due to modern advances in technology this point has been reached. It is currently impossible to obtain 100% pure gold.
Gold Filled
The process by which a cheaper base metal has a layer of gold applied on top of it. This layer must constitute at least 1/20th of the weight of the object. The gold itself must be at least 10 karat (kt.)
Gold Flashed
A gold coating that is at least seven millionths of an inch thick atop the base metal. Also known as gold washed.
Gold Nugget
One of the ways that gold is discovered, through the action of a river eroding a seam of gold, small pieces are washed downstream and weathered into a nugget.
Gold Price
The price at which gold trades in relation to a currency. Most commonly used is an ounce of gold in relation to dollars, but it can relate to any currency.
Gold Standard
Throughout history many currencies were issued with the idea that each note represented a share of the gold held in reserve by the currency issuer (i.e. The King or the Central Bank). This is known as the Gold Standard where the currency is backed by gold or another precious metal. However, most modern economies have moved away from the gold standard to Fiat Money.
Grading Service
An umbrella term that refers to a business or service provider that determines the authenticity and quality of a gold coin.
Grain
A part of the measurement units for gold, 480 grains represent one troy ounce.
Hallmark
The stamp that denotes the producer of a bullion coin or bar.
Hedge
A way of safeguarding or dampening the impacts of uncertain and unforeseeable market conditions through protectionist investing.
Ingot
A block of precious metal that has been shaped, most commonly into a bar.
Intrinsic Value
The value of the actual metal content of a coin, rather than its face value.
Karat (Carat)
While in jewelry only the term carat can be used to indicate the purity of a gemstone, in gold it can be used interchangeably. In essence the karat refers to purity of the precious metal. Pure gold is 24 karat.
Legal Tender
A currency that a merchant or creditor that must be legally accepted as a form of payment.
Legend
The inscription on a gold coin.
Liquidity
Gold that can be readily translated into cash.
Loco
A place in which gold or silver is physically held, where delivery charges apply. The most common is Loco London, which refers to the London vaults.
London Fix
Two daily bidding sessions, governed by the five major London based gold firms that govern the price of gold.
Lustre
The sheen on the surface of an uncirculated gold coin.
Medallion
While resembling a coin, it is not considered a ‘coin of the realm’. A government or private mint will issue medallions instead.
Mint
A facility where gold coins or bars are manufactured.
Mint Mark
A symbol or letter used to denote the minting facility the coin was produced at.
Mint state
A coin that is uncirculated.
MS-60
The lowest grading a coin can receive and still be considered uncirculated, using the Sheldon Grading Scale.
Numismatic Coins
Are collectors coins, in that their value is not solely contingent on their intrinsic value, but instead also their rarity, historical nature or other such marks that make them interesting to collectors. For instance coins found in an archaeological dig.
Numismatist
The formal term for a coin collector.
Obverse
The ‘front’ of a coin containing its principal face and legend.
Planchet
A tool used in the stamping of a coin.
Premium
The percentage a coin sells over the intrinsic value of its materials.
Restrike
An official reproduction of a coin which has left circulation, a British Sovereign is an example of this.
Slabbing
The process in which a coin, after being graded, is coated in a protective plastic film to prevent wear and tear.
Solid Gold
While there is no official definition, most jewellers and dealers apply it to an item where the gold is at least 10 karat and is not hollow.
Spot
The physical delivery price of the bullion to the purchaser.
Troy Ounce
The primary unit of weight for precious metals. It equals 31.1035 grams. This is separate from the usual avoirdupois system.
Uncirculated
A coin that has not entered currency rotation and thus has not changed hands since minting. It is considered mint condition.
Vermeil
When another metal is plated with a gold coat.
