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

A redemption mechanism (also called a creation/redemption mechanism) is deployed by market makers to ensure the price of an ETF does not fluctuate too far away from its NAV.

Have you ever slept on an air mattress? If yes, you probably noticed that the mattress deflated overnight. It lost air, you couldn't sleep, so you had to get up and reflate the mattress in the middle of the night, waking up all around.

Comex has several warehouses for metals (as investors may take delivery), which contain lots of gold. The bullion held in these warehouses is divided into two categories: eligible gold and registered gold.

Relative gold (a.k.a. rgold, r-gold, relgold, or rel-gold) is a term used to describe the price of gold in relation to the moving average of this price. One concrete formulation of relative gold is as a ratio of the current price of gold to the 200-day moving average of this price. Specific values of this ratio could then be used to find signs for the gold market.

Relative silver (a.k.a. rsilver, r-silver, relsilver, or rel-silver) is a term used to describe the price of silver in relation to the moving average of this price. One concrete formulation of relative silver is as a ratio of the current price of silver to the 200-day moving average of this price. Specific values of this ratio could then be used to find signs for the silver market.

We bet that you have heard about the 2019 repo crisis. On September 17, 2019, the repo interest rate more than doubled, as the chart below shows. That crash prompted the Fed to pump $500 billion into the repo market since the repo crisis started.

Resistance level is a key concept in Technical Analysis that is very helpful in determining the right moment to sell in an uptrend or to sell short in a downtrend. In other words, if gold is rallying and it's moving toward a price level at which it reversed several times in the past, we can say that it's gold resistance level.

A reversal is a change in the direction in which an asset is going. Reversals can be extremely important for gold and silver investors and traders s they might signify a change in the current trend. At the same time, the analysis of reversals is not limited to price itself. The reversals can take the form of a shooting star candlestick, but there are also other ways in which the price can reverse. Most of them, however, are confirmed by high volume readings.

The term “risk premium” refers to the difference between the higher interest rates that riskier investments must pay to attract investors and the interest rate of the risk-free investment. Thus, it is the return in excess of the risk-free rate of return than an investment is expected to yield. It is a compensation for investors to bear more risk and hold the risky asset rather than the risk-free asset. The risk premium is positive, since people are generally risk averse, i.e. they dislike risk. The risk premium explains why, for example, stocks have higher expected returns than a bank account or Treasury bonds.

The Relative Strength Index (RSI) is one of the most popular technical indicators that can help you determine overbought and oversold price levels as well as generate buy and sell signals. The RSI Indicator has proven to be quite useful to gold traders and investors. It could potentially help to identify local tops and bottoms.

R-squared is a statistical measure of how well a statistical model (it may be just a line) fits the data. It is also known as the coefficient of determination, and denoted as R2 or r2. To be more specific, R-squared is the percentage of the variability of the data that is explained by the model (i.e., it is the explained variation divided by the total variation). In simple words, R2 shows how much of the changes in one thing (like the prices of gold stocks) can be explained by changes in another thing (like the price of gold). R-squared is always between 0 and 100 percent, where the higher the-R squared, the better the model fits the data. An R2 of 1 indicates that the model (it may be a simple regression line) perfectly fits the data, while an R2 of 0 means that the model does not fit the data at all.

A safe-haven asset is an asset that is uncorrelated (weak safe-haven) or negatively correlated (strong safe haven) with another asset or portfolio in times of market stress or turmoil. So, a safe-haven asset protects investors during crises, but not necessarily during normal times. Hence, a safe-haven asset is expected to retain its value or even increase in value during times of market turbulence when most asset prices decline.