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

Chicago Board of Trade, established in 1848, is a commodity exchange and a designated contract market that offers traditional commodity and other financial instruments to traders, subject to the exchange rules and regulations.

The Central Bank Gold Agreement (CBGA), called also the Washington Agreement on Gold, is an accord regulating official gold sales. The original version of the agreement was signed on September 26, 1999 in Washington, D.C. Under the agreement, the European Central Bank, the Swiss National Bank and 13 other European national central banks committed to limit sales to 2,000 tons over five years (400 tons per year).

Centralized market is a specific type of a financial market. All markets are places where buyers and sellers meet to exchange goods, products and services. For instance, London Metal Exchange is a centralized market for gold.

Ceteris paribus is a Latin phrase meaning “other things being equal or held constant”, which is used to simplify the reasoning. It is commonly used in economics, since economic examples typically involve the interaction of many variables, such as supply and demand. For instance, an increase in value of the U.S. dollar will tend to decrease the price of gold. However, it is necessary to assume “all other things being constant,” since if real interest rates suddenly plunge to negative levels (or risk aversion significantly rises), the generalization about the dollar might not hold and the price of gold may actually rise (although the rise would be higher, absent the U.S. dollar appreciation).

A Contract for Difference (CFD) is a contract between two parties who speculate on the future price of some asset. These two parties are called “buyer” and “seller” – the buyer will pay to the seller the difference between the current price of the asset and its value at the time he entered the contract (if this difference is negative, the seller will pay the buyer). For instance if someone is bullish on gold, they can buy a gold CFD and if they are bearish then can sell a gold CFD.

The U.S. Commodity Futures Trading Commission (CFTC), based in Washington, D.C., is an independent U.S. federal agency created in 1974 that regulates futures markets (like Comex), as well as option and swap markets.

There is a council of Chinese generals. One of them explains, “we will attack in small groups, two or three million each”.
A new global power. The world’s most populous country. One of the world’s fastest-growing economies, with the largest GDP as measured by purchasing power parity. The world’s largest exporter and second-largest importer of goods. China. What are its links with the gold market?

What do you see, when you hear “global hegemony”, or “empire”? Probably Rome with its highly disciplined legions. Or maybe the US with its famous Navy, including nuclear-powered ships. But China also was once a global hegemon. OK, we know – it was a long time ago, in Ancient Asia. However, after years of oblivion, the Red Dragon woke up. And some people say that China is on the way to replace the US as a global hegemon. Are they right? And what would it mean for the gold market?

You know, when I sit in meetings and things are very tense and people take things extremely seriously and they invest a lot of their ego, I sometimes think to myself, 'Come on, you know, there's life and there's death and there is love.' And all of that ego business is nonsense compared to that.

We love AC/DC and High Voltage is a great song. But high voltage can be also fatal. This is why we use circuit breakers – to protect an electrical circuit from damage caused by excess current.

However, circuit breakers, or trading curbs, are not only used to halt excess overload, but also to curb panic selling in the stock exchange. These are temporary measures that halt trading. They were implemented in the US after the Black Monday (October 19, 1987) when the Dow Jones plunged 22.6 percent in a single day. They apply to both individual securities and market indices – in case of the latter, they are triggered only based on downward price movements. There are three levels of circuit breaker on NYSE, which kick in when, for example, the S&P 500 declines 7 percent, 13 percent, and 20 percent from its closing price the day before. In the two first cases, trading is halted for 15 minutes, unless it’s after 3:25 p.m. Eastern time. Level 3 circuit breakers halt trading for the remainder of the trading day.

Although seen as useful measures to curb panic selling, the circuit breakers can actually make trading more volatile and speed up the panic, because traders try to exit the market before the circuit breakers officially kick in. And the mere fact that some breakers were triggered, can exacerbate panic later. This should increase demand for gold as a safe haven. Moreover, the flow of information is reduced during trading halts, which hampers the price discovery process.

In the worlds of finance and banking the activity of clearing encompasses all activities from the time an initial commitment to complete a transaction is made until that transaction is finally settled

Clearing prices exist in all types of markets and for all types or product or service. The clearing price for gold (we're using gold as an example here, but the term can be used for assets in the broadest terms, including goods, services and investment products) is the price at which gold can be sold and the market can be said to be "cleared".