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

Backwardation is a phenomenon seen in the futures market, which futures traders need to monitor. A forward curve is said to be in backwardation when futures are traded at a discount in comparison with spot. Gold backwardation means that traders could potentially gain capital (versus simply buying gold right away) when holding gold futures until the contract expires.

We bet that you have heard about bailout (if not, you are welcome to read our take on bailout here). But bailouts are so yesterday - do you know what a bail-in is?

What is the connection between removing water from a sinking vessel using a bucket, paying for someone’s release from jail, and jumping from an airplane with a parachute? Yes, all these activities are referred to by the verb “to bail out”.

The Balance Of Payments is a government produced financial measure relating to a period of time which accounts in financial terms for the difference between the value of all the country’s imports and its exports. It is an important measure of a country’s relative performance in the global economy.

The Bank of Japan, based in Tokyo, is the central bank of Japan. It ensures the smooth settlement of funds among banks and other financial institutions and issues banknotes. The BOJ also carries out currency and monetary control, which is aimed at achieving price stability (understood as a 2 percent year-on-year rate of change of the consumer price index), thereby contributing to the sound development of the national economy. The BOJ's highest decision-making body is the Policy Board.

The coronavirus crisis has led to the toilet paper run. The fear of being trapped under quarantine for a long time caused panic buying of the toilet paper. Although called by many observers irrational, the frantic purchases were totally rational, given the actions of other people. After all, if others run to the store, the optimal strategy for you is to do the same, otherwise you will be left without toilet paper. And it would be a shitty result, wouldn’t it?

It turns out that toilet paper run is similar to the bank run. What is it? The bank run occurs when a large number of clients withdraw their deposits from a bank at the same time, because they fear the institutions will run out of money.
Some economists say that a bank run is the result of panic rather than true insolvency, but this is not true. The hard truth is that commercial banks which operate under the fractional-reserve banking system, are generally bankrupt. This is because they keep only a fraction of their clients’ money at bank (this is the difference from the toilet paper run – stores do not promise to keep toilet paper ready on the shelf for you). So, in case of bank runs, banks have to fail. It is like poker, you can have poor cards but still be in game – until somebody says “check”.

A bearish divergence between the price and a technical indicator is a moderately useful tool for detecting a coming reversal in the bullish trend. Bearish divergence in gold is therefore a moderately bearish signal for the gold market.

A bear market refers to a decline in prices, usually for an extended period, in a single security or asset, group of securities or the securities market as a whole. Its opposite is a bull market where prices are rising. In case of precious metals, the great gold bear market started in 1980 after the major, long-term top.

The bid-ask spread is the difference between the price quoted by investors who want to sell a certain stock or asset (ask price) and those who wish to buy it (bid price). The higher the spread the less liquidity in the market for the asset.

A black swan is an unpredictable and rare event in the markets. Is gold a hedge against black swan events?

To live like James Bond, you need a lot of money. An Aston Martin is not cheap, and neither are luxury rendezvous.

Would like to hear the best joke in the world? “Bond yields can only go up from here!”. This is what many investors believed for years. But they were constantly wrong, as the chart below shows.