The terminology in the Precious Metals market is often a source of confusion for both the experienced and the new investor. This list includes many terms that often need clarification.

Actual Gold Content: The amount of gold that exists in an object after all the alloys have been removed.

Alloy: A mixture of two or more metals. Metals such as silver, nickel, copper and zinc are often mixed with gold to provide certain characteristics, such as hardness or color.

Approved Refiner: One of a select group of refineries whose metal production is seen as meeting standards for purity and appearance. The bars produced at these refineries are accepted for delivery against contracts on Futures Exchanges and on the “Spot” market. Examples of approved gold refiners include, but are not limited to: Johnson Matthey Inc., Royal Canadian Mint, and PAMP Suisse. A more complete list can be found at the Gold Bars Worldwide website

Assay: A chemical test that determines the purity of a substance.

Ask: the price at which a dealer offers to sell.

Base Metal: Base metal is a mixture of non precious metals. Typically a metal from the group; copper, aluminum, nickel, tin, zinc and lead. It is frequently used as a base for gold-filled, gold plated, or rolled gold plate coverings.

Bid: the price at which a dealer is willing to buy.

Broker: An agent who handles the public’s orders to buy and sell securities, commodities or other property in exchange for a commission charged for the service.

Bullion: Physical metal in lump form, minted for easy transport and storage. It may take the form of coin bullion or bar bullion.

Bullion coin: a coin with a symbolic face value but trades at a price relative to its

Certificates: A common mechanism issued by banks to signify ownership of a quantity of precious metals without taking physical delivery. Certificates confirm an individual’s ownership while the bank or third party holds the metal on the client’s behalf. The client saves on storage and personal security issues, and gains liquidity in terms of being able to sell portions of the holdings (if need be) by simply telephoning the custodian. Other investors feel more safe taking physical delivery of the metals themselves.

Certified Coin: A coin authenticated and graded by a professional service.

CFTC: Commodity Futures Trading Commission, the futures and options watch-dog.

COMEX: The Commodity Exchange in New York. It is one of the world’s major commodities futures exchanges where gold and silver are traded. The Comex is in New York City and is a division of the New York Mercantile Exchange (NYMEX).

Correction: a decline in prices following a rise in a market.

Edge: The periphery of a coin, as viewed from the side.

ETF: Exchange Traded Fund. This is a publicly traded fund in which you buy shares in gold but never actually hold any physical metal.

Face Value: The nominal value given to a legal tender coin or currency (for example a 1-oz gold American Eagle has a face value of $50). It is the minimum value guaranteed by the issuer but does not necessarily reflect the current market price/ value of the metal. In this case, as of today, the face value of the 1-oz Gold American Eagle is $50, but the 1 oz. of gold bullion in the coin is worth approximately $1,600.

Fiat Money: Paper money made legal tender by law. It derives its value from government regulation. For example, the U.S. Dollar does not derive its value from the paper that it is printed on, but rather its backing from the U.S. government.

Fineness: A measure of precious metal purity in parts per thousand: a gold bar of .995 fineness contains 995 parts gold and 5 parts of another metal. Example: the American Gold Eagle is .9167 fine, which means it is 91.67% gold. The maximum possible fineness is .999, even if the metal is completely pure.

Fractional Coins: This term is most often used when referring to gold coins. It is referring to smaller gold coins than 1 ounce. These coins provide a lower price point and allow for greater flexibility when liquidating or for barter.

Fine weight: the metallic weight of a coin, ingot, or bar, as opposed to the item’s gross weight which includes the weight of the alloying metal. Example: a 1-oz Gold Eagle has a fine weight of one troy ounce but a gross weight of 1.0909 troy ounce.

Fungibility: the property of a good or a commodity whose individual units are capable of mutual substitution, such as crude oil, shares in a company, bonds, precious metals, or currencies.

Fungible Program: In a precious metals fungible program, the investor owns a defined interest held by a third party. Instead of taking physical delivery, the investor receives a certificate that describes the investment level. The fungible program is popular for many reasons including the lower premiums over the ‘spot’ price of the metal and the high liquidity.

Gold standard: a monetary system in which the standard economic unit of account is a fixed weight of gold. Currently, no country uses the gold standard. Yet many central banks, including the United States’ central bank hold large gold reserves. Many central banks around the world, including China’s, are currently adding to their gold reserves.

Grading service: a company that grades numismatic coins. Generally, graded coins are stored in plastic, a procedure called “slabbing.” PCGS and NGC are the dominant grading services in the United States.

Gram: the basic unit of weight of the metric system. (31.1035 grams one troy ounce.)

Ingot: a mass of metal cast into a convenient shape. In the precious metals industry, the words ingot and bar are used interchangeably.

Intrinsic Value: the value of the metal in a coin or bar. A good example is the ‘value’ of a gold medal from the 2012 Olympics. For the athlete, the value is ‘priceless’, it does not come from the medal itself, but rather what it symbolizes. However, the intrinsic value of a gold medal using current prices is $686 (an Olympic gold medal is not made of pure medal- it contains 394 grams of .925 silver and 6 grams of gold).

Investment Grade: A term that refers to coins in higher grades, usually Mint State-65, Proof-65, or higher. Only semi-numismatic and numismatic coins are graded as bullion coins derive their value from the metal bullion and not the rarity and/or condition of the coin.

IRA: An Individual Retirement Account in the United States is a form of retirement plan that provides many tax advantages for retirement.

Karat: A measure of gold purity in parts per 24. Most often used in the jewelry industry.

Liquidity: the quality of being readily convertible into cash.

Market value: the price at which a coin or bullion item trades.

Melt Value: The intrinsic worth or metal in a coin or alloy. It is determined by multiplying the amount of the metal it contains by the spot price of the metal.A good example is the ‘value’ of a gold medal from the 2012 Olympics. For the athlete, the value is ‘priceless’, it does not come from the medal itself, but rather what it symbolizes. However, the intrinsic value of a gold medal using current prices is $686 (an Olympic gold medal is not made of pure medal- it contains 394 grams of .925 silver and 6 grams of gold).

Mining Stock: A publicly traded stock in a gold mining company. It is similar to an ETF, except that it focuses on a single company.

Mint: The place where a coin or bar was manufactured.

Mintage: The total number of coins struck of a specific coin.

Mint Mark: A letter or symbol stamped on a coin identifying the minting facility where it was manufactured.

NGC: Numismatic Guaranty Corporation of America, one of two dominant coin grading services in the United States.

Numismatic coins: coins whose prices depend more on their rarity, condition, dates, and mint marks rather than solely on their gold or silver content.

Numismatist: a coin collector.

NYMEX: the New York Mercantile Exchange, a future exchange where platinum and palladium are traded. Now merged with COMEX.

Obverse: the front side of a coin which contains the principal design.

Ounce: a unit of weight. In the precious metals industry, when the term ounce always refers to a troy ounce equal to 31.1035 grams.

PCGS: Professional Coin Grading Service, one of two dominant coin grading services in the United States.

Premium: the dollar amount or percentage a bullion metal sells over its ‘spot price’.

Proof: a coin produced using a specially polished and treated die. Proof coins are produced for the collector market.

Purity: The amount of precious metal in an alloy. Purity may be measured in karats (parts per 24; gold only), percentage (parts per hundred), or fineness (parts per thousand).

Reverse: the back side of a coin.

Rounds: Most commonly, ’rounds’ refer to 1-oz silver coins which are privately-minted. They are .999 fine round pieces of silver about the sizes of silver dollars. They are popular because they have lower premiums than government produced and backed 1-oz silver coins even though they contain the exact same amount of silver. In the most general sense of the word, the term ’round’ can be defined as any 1 oz. silver coin whether privately minted or produced and backed by a government. However, in the precious metals industry it is usually used when referring to privately minted 1 oz. silver coins.

Semi-numismatic coins: coins that are either numismatic coins of a low grade or fairly common coins that still have some collector’s value. The primary value of these coins comes from the metal content, not the collector’s value. Semi-numismatic are less expensive than true numismatic coins, but they do carry a higher ‘premium’ than regular bullion coins because they are in demand among some collectors.

Slabbed coins: coins are stored in plastic for protection against wear. Generally, “slabbed” coins are graded by one of the two major grading services in the United States.

Spot Price: The current market price of a precious metal with delivery in two business days. Spread: The difference between Bid price(the price a dealer is willing to pay) and Ask price (the price a dealer is willing to sell).

Troy Ounce: A specialized unit of weight used in the precious metal market equal to 1.097 U.S. (avoirdupois) ounces, or 31.1 metric grams. There are 12 troy ounces to the troy pound, and 14.58 to the U.S.

Uncirculated: a coin in new condition, often described as “brilliant uncirculated” or “BU.”

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