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

The idea of a political business cycle is one of the theories of the business cycle, formulated in the 1970s. According to it, political incumbents try to juice up the economy during election years to improve their chances of re-election. They stimulate the economy just before an election to increase their odds of remaining in office, while reversing the course and restricting the fiscal and monetary stimuli shortly after the elections (to avoid harmful long-term consequences). Thus, major elections produce economic booms and busts, as politicians try to create an artificial boom before every election and take advantage of the voters' short-sightedness. Similarly, theory and history suggest that the U.S. central bank tries to avoid, if possible, any major monetary actions as an election approaches.

A portfolio diversifier is a portfolio addition which reduces the overall risk in a portfolio. This is an important feature, since diversification allows investor to obtain a desired return without taking as much risk as with an individual security.

The pound sterling is the official currency of the United Kingdom (and some British Crown Dependencies or Overseas Territories, such as Jersey, Guernsey, the Isle of Man, Gibraltar, South Georgia and the South Sandwich Islands, Saint Helena, Ascension and Tristan da Cunha, or the claimed British Antarctic Territory). The currency is managed by the Bank of England, based in London. Its international code is “GBP”, while its symbol is £. 

The Producer Price Index (PPI) measures the average change in the price of a basket of representative goods and services sold by manufacturers and producers in the wholesale market (this is why it was known in the U.S. as the Wholesale Price Index up to 1978).

A precious metal is defined as a rare, naturally occurring chemical element that has high economic value and is chemically resistant. In the past, precious metals served as a currency. Now they are an investment or industrial commodity.

Bill Clinton, George W. Bush and George Washington are on a sinking ship. As the boat sinks, George Washington heroically shouts: “Save the women!” George W. Bush hysterically hollers: “Screw the women!” Bill Clinton's asks excitedly: “Do we have time?”

There are a number of ways to define a price bubble (also referred to as a speculative bubble, economic bubble, asset bubble or financial bubble). The simplest definition says that a price bubble is an upward deviation of the market price from the asset's fundamental value. In other words, the bubble means an upward price movement over an extended range which then implodes.

A price extension is a method of obtaining targets for swings in the market. It is based on past moves and Fibonacci retracement levels and it allows investors and traders to extend the previous moves and identify the targets for potential next moves in the market. Price extensions can be used to analyze and make price predictions for many markets. For instance, when applied to gold, they can provide one with gold price predictions.

Purchasing Power Parity (PPP) allows us to compare economies more effectively than nominal purchasing power. It enables us to assume that all people are using the same currency and that prices all over the world are the same, helping us measure the affluence of each country in a comparable way. This provides a clearer picture of the global economy.

The put-call parity is useful as part of a hedging/ speculative strategy for a trader who wants to participate in the futures market. The put-call parity explains the relationship between the prices of put and call options in the same category-in other words, options with the same strike price, expiration date and underlying price.

A derivative that provides you with leverage during downtrends, while limiting your risk. The catch is that you have to be right on time.