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

People need to feel their money is safe, leading them to seek safe assets. How does gold function as a safe-haven?

You have probably heard this term many times. You may know someone who you would say is this type of person. Perhaps you are or have been called so, even though you are not. Goldbug – it’s very common term in the financial sector, sometimes used as a belittling pejorative. Rightly so? Not necessarily. You see, the problem is that the term is used to describe several interconnected yet distinct aspects.

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.

The golden cross is a relatively infrequent technical indicator which occurs when an asset’s (gold’s) short-term moving average (like the 50-day moving average) crosses above its long-term moving average (like the 200-day moving average). The golden cross is often associated with important upward price movement and it is considered a bullish signal. The crossover is considered more significant when accompanied by high trading volume. Once it occurs, the long-term moving average is considered a major support level.

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).

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.

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.

Once upon a time, a little girl called Goldilocks came to a house of Three Bears... We guess that you have heard the whole story. For sure, you have, Goldilocks and the Three Bears is one of the most popular fairy tales in the Western world. Now, you might wonder why we refer to the story for children in the dictionary for terms related to the precious metals investing. The reason is, of course, the Goldilocks economy we still have, to the despair of gold bulls.

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.

Gold as a time-proven hedge against inflation. In the Roman era, one ounce of gold got you a toga, sandals and belt. These days, it still buys you a decent men's suit. So, it surely pays off to consider the king of metals when planning to maintain your purchasing power in retirement.

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.

One of the largest investment banks in the world, founded in 1869 in New York. A primary dealer in the United States Treasury security market, which has revolving door relationship with the U.S. government. It’s believed by many to be the world’s most evil investment bank, which faces many controversies and legal issues. Goldman Sachs. The bank that allegedly runs the world and whose tentacles squeeze the globe. Let’s analyze its link with gold – and whether its collapse is coming, which some analyst are afraid of.