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

Almost every sovereign nation in the world issues and controls its own currency. There are some countries which have elected to use another country's currency, primarily the United States Dollar. Sovereign currencies are the legal tender within their respective countries. The need for exchange rates between sovereign currencies has arisen as international trade has spread and flourished.

Almost every sovereign nation in the world issues and controls its own currency. There are some countries which have elected to use another country's currency, primarily the United States Dollar. Sovereign currencies are the legal tender within their respective countries. The need for exchange rates between sovereign currencies has arisen as international trade has spread and flourished.

The Federal Open Market Committee (FOMC) is the policy making branch of the Federal Reserve Bank in the United States. It meets eight times a year to analyze the current market situation and make decisions based on its findings. The decisions made by the FOMC will have direct impact on the funds held by the Fed, causing ripple effects in the market. The decisions by this committee are eagerly awaited by the financial industry.

Forced Liquidation is the situation where open positions are offset by the brokerage firm holding the account, usually after warnings have been issued that the account is under-margined due to adverse price movements and failure to meet margin calls. Traders are always concerned of forced liquidation because it rebalances the portfolio to reduce the excess market risk under adverse market conditions. The broker has the right to offset the positions if the account holder chooses not to meet the margin requirements.

The foreign exchange (forex) market is an over-the-counter currency trading market that allows buyers and sellers to trade foreign currencies. The Forex market is the most liquid in the world with an average traded value of $1.9 trillion per day. The Forex market is operational 24 hours a day and five days a week. Individuals from all over the world can trade freely through forex trading.

Forward guidance, informally called ‘open mouth operations’, is public central banks’ communication about the likely future course of monetary policy in order to influence market expectations of future short-term interest rates and thus present economic conditions.

From a precious metals investor’s point of view, fractals are complicated structures of prices of metals (for instance, charts of prices of metals). The complexity of these structures (charts) can be described by a mathematical measure – the fractal dimension. 

A measure of the complexity of data. What is particularly interesting for precious metals investors, a fractal dimension can measure the complexity of price paths (or charts of prices) of metals. The higher the fractal dimension is the more complicated the price paths (charts) are.

Fractional-reserve banking is a banking system (currently practiced in most countries worldwide) in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. In other words, contrary to full-reserve banking, only a fraction of a bank's demand deposits are kept in reserve and available for immediate withdrawal. Therefore, when you deposit $100, the bank will keep only a small fraction of your money in reserve and lend out the rest of your money. It implies that fractional-reserve banking expands credit and money supply beyond the amount of the underlying reserves of base money originally created by the central bank. The proponents of this system argue that fractional reserve banking allows for capital investment and economic growth in excess of what a full-reserve system would allow. The opponents believe that the fractional-reserve banking causes macroeconomic instability.

I do not think it an exaggeration to say that history is largely a history of inflation, and usually of inflations engineered by governments and for the gain of governments.

I bet you know Salma Hayek, one of the world’s most beautiful women in the world of her time. This is not an article about her, but about Friedrich Hayek, her grandfather (nah, bad joke, he was completely unrelated to Salma). We know that you might be slightly disappointed, as her artistic talent and appearance (Friedrich had a funny mustache and a large nose) are definitely more impressive. However, she loses when it comes to philosophical depth (try to guess who said that “I keep waiting to meet a man who has more balls than I do” versus “The mind cannot foresee its own advance”).

The analysis of underlying factors which might influence the price of an asset or security, or which might influence a particular market as a whole. In the world of gold and silver, fundamental analysis involves thorough examination of the surrounding environment in order to determine the forces that might have an impact on prices in the long term. Fundamental analysis is primarily interested in factors such as the overall state of the economy, the interest rate levels, the general sentiment on the market, etc. rather than in past price paths (as opposed to technical analysis).

In a futures contract two parties agree to exchange an asset (gold, currencies, stock indexes, hog bellies) for a price agreed upon today (the strike price) but with delivery to take place at a specified future date. The party agreeing to buy the underlying asset, is said to be "long" and hopes the price will go up, and the party agreeing to sell the asset is said to be "short" believing that the price will decline. Gold futures term usually refers to a futures contract that is based in the price of gold.