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

One of the largest investment banks in the world, headquartered in New York. The largest U.S. bank, the world’s sixth largest bank by total assets and the world’s second most valuable bank by market capitalization. JP Morgan Chase. An eternal enemy of precious metals bulls, accused of selling uncovered shorts on Comex. The bank that allegedly manipulates gold and silver markets. Let’s analyze its link with gold – and whether its collapse is coming, as some analyst are afraid.

Juniors (also known as junior mining stocks) are low cap (with market capitalization usually under 500 million), and thinly traded (daily volume usually under 700,000) exploration companies searching for new deposits of precious metals. Junior mining companies strive to acquire properties that are believed to have a big probability of including large resource deposits.

Karat (abbreviated to kt or ct) is used to measure the purity of gold. It uses a scale of 24, where 24 karat means pure gold.

The public attention focuses on the business cycle. It's quite understandable given its importance. However, economists distinguished also other cycles, such as Kitchin inventory cycles, the Kuznets cycles and the Kondratieff cycles (a.k.a. Kondratiev cycles).

The London Bullion Market Association (LBMA) is a London-based international trade association that represents the wholesale over-the-counter gold and silver market in London. In other words, the LBMA coordinates the London gold market, as trading in that market is conducted amongst the members of the LBMA.

Founded in 1850 by three brothers. It started as a dry-goods store to become later a commodity house and eventually a house of issue. Before its collapse, it was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch). The symbol of the global financial crisis, whose collapse put the world into the Great Recession, the most severe economic downturn since the Great Depression. For some, a victim of the Fed’s decision not to rescue it. For others, the Bank of Evil, guilty of accounting frauds and responsible for the crisis. Lehman Brothers. Let’s analyze its link with gold and lessons we can learn from its bankruptcy.

The use of various financial instruments or borrowed capital to increase the potential return of an investment. Investors leverage their investments, expecting the profits made to be greater than the cost of borrowing.

The London Interbank Offered Rate (LIBOR) is the interest rate at which large global banks offer to lend funds to one another in the international interbank market. It measures the cost of funds to large institutions operating in the London financial market or with London-based counterparties. LIBOR is administered by the ICE Benchmark Administration and published by Thomson Reuters. It is calculated for five currencies (U.S. dollar, euro, pound sterling, Japanese yen and Swiss franc) and seven borrowing periods (overnight, one week, and 1, 2, 3, 6 and 12 months). The most commonly quoted rate is the three-month U.S. dollar rate.

Liquidity is an illusory concept. You see, during boom all markets look liquid. But it quickly changes during the bust. As the saying goes, liquidity is a coward as it disappears at the first sign of trouble.

The London bias is a statistical regularity showing that gold prices usually decline during London trading hours, especially around the PM Fix, whilst they rise during Asian trading hours. Another version of the idea behind the London bias is that there is a tendency for the London PM gold fix to be lower than the London AM gold fix.

The London gold fix, officially called the LBMA Gold Price is set in the London gold market twice a day: at 10:30 GMT, and 15:00 GMT, in U.S. dollars, serving as a benchmark for pricing gold. It is widely used by producers, consumers, investors and central banks.

The London Gold Market is part of the London Bullion Market, which is a wholesale over-the-counter (OTC) market for the trading gold and silver, coordinated by the London Bullion Market Association. It is a wholesale market – the usual minimum size of transaction is 2,000 ounces of gold (while the standard size is 5,000 ounces) – individual investors are practically excluded from the market. It is a decentralized over-the-counter dealer market, which means that the dealers independently quote bid and ask prices and trades, making this market less transparent.