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

Confidence is a key ingredient in life and in business. It is also crucial thing for the economy as a whole. Remember the Great Recession? It was so severe partly because banks ceased to trust each other. The level of consumer confidence is very important economic indicator, as well. It measures the degree of optimism that consumers fell about the state of the economy.

People are emotional beings and herd animals at the same time, so sentiment is a key factor in many markets. In particular, sentiment is an important driver for the gold prices, as the yellow metal does not bear any yield and its industrial use is limited. So it is difficult, if not impossible, to calculate the bullion’s fundamental value – and this is why the sentiment is so important in the precious metals market.

Traders, especially arbitrageurs, make use of contango when it widens or narrows from normal values. Gold contango creates arbitrage opportunities in this particular metal.

The definition of a conversion rate is highly dependent upon the context in which it is being discussed, but in the broadest sense, a conversion rate is the ratio of one input measured against a desired set of results or outcomes.

The butterfly effect describes the situation when the flapping of the wings of a butterfly causes (or influences at least) a tornado several weeks later in a completely different location. But after 2020, the better name could be perhaps “the bat effect” – somebody ate a bat in Wuhan and several weeks later the whole world started to suffer from the coronavirus. But don’t worry, the coronavirus won’t last long – it’s made in China!

Many investors focus on public debt. But investors should not overlook private debt. In a way, high private debt is even more dangerous. Just think about the global financial crisis which was partially caused by excessive mortgaging accompanied by offloading such securities into CDOs sold to unsuspecting investors.

A temporary reverse movement, usually negative, of precious metals, stocks, bonds or indices. Corrections are generally short-lived price declines on low volume, marking a transitory pause in an uptrend or downtrend in a market. In contrast to bear (or a bull) markets, corrections are relatively shallow and temporary. So, if gold is in an uptrend, then a gold correction means a temporary downswing that is followed by an even bigger rally.

Is a statistical method using a number that describes the degree of a linear relationship between two assets that either move together, or inversely, or are not related at all. The correlation coefficient is a way to measure the strength of the relationship between two assets, useful because analysis of one market can sometimes help us infer things about the other market. We use the correlation phenomenon in our analyses and alerts.

The Correlation Matrix is a table that contains correlation coefficients among several markets (including precious metals) in different timeframes.

The CoT report enables investors to peek behind the scenes of the gold futures market and to better understand the psychology of the marketplace and, thus, get a better idea of futures moves on the gold market. This is because the COT report shows the net long or short positions of different types of traders.

The country risk premium refers to the difference between the higher interest rates that less stable and riskier countries must pay to attract investors, and the interest rates of an investor's home country.

The Consumer Price Index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households, such as food, transportation, electricity etc. The CPI is calculated by taking price changes for each item in the basket of goods and averaging them with weights reflecting their shares in the total of the consumer expenditures covered by the index. There is also core CPI which excludes high volatility items, such as energy.