This glossary defines the most important terms you’ll encounter when researching and investing in gold. Terms are organized alphabetically within categories.
Pricing and Market Terms
Ask Price: The price a dealer is willing to sell gold at. The ask is always higher than the bid. When you buy gold, you pay the ask price.
Backwardation: A market condition where gold futures prices are lower than the current spot price. Relatively rare; sometimes signals strong physical demand.
Basis: The difference between the spot price and the futures price. A positive basis (futures > spot) is normal (contango); negative basis (futures < spot) is backwardation.
Bid Price: The price a dealer is willing to pay when buying gold from you. When you sell gold, you receive the bid price.
Bid-Ask Spread: The difference between the bid and ask prices. A larger spread means higher transaction costs. Common spreads: $5–$20/oz for bullion coins under normal conditions.
Contango: A market condition where futures prices are higher than the current spot price, reflecting storage and financing costs. This is the normal state of gold futures markets.
Fix (London Gold Fix): A twice-daily benchmark price for gold set by major bullion banks. Now called the LBMA Gold Price. Published at 10:30 AM and 3:00 PM London time.
Premium Over Spot: The markup above the spot price that you pay for physical gold. Includes fabrication costs, dealer margin, and demand premiums. Expressed as a dollar amount or percentage.
Spot Price: The current market price for immediate delivery of one troy ounce of pure gold. The global benchmark for all gold pricing.
Spread: See Bid-Ask Spread.
✓ Pro Tip
When comparing dealer prices, always calculate the premium as a percentage over spot — not just the dollar amount. A $50 premium means very different things at $1,500 spot versus $4,200 spot.
Weight and Measurement
Avoirdupois Ounce: The standard ounce used for everyday objects (28.3495 grams). NOT used in precious metals. Don’t confuse with troy ounce.
Gram (g): A metric unit. 1 troy ounce = 31.1035 grams.
Grain: A historical unit. 1 troy ounce = 480 grains.
Kilogram (kg): 1,000 grams = 32.1507 troy ounces.
Pennyweight (dwt): Traditional unit used in jewelry. 1 troy ounce = 20 pennyweights.
Tola: South Asian unit of weight. 1 tola = 0.375 troy ounce (11.664 grams).
Troy Ounce (ozt or t oz): The standard unit for precious metals. 1 troy ounce = 31.1035 grams. Always verify which “ounce” is being referenced.
Troy Pound: 12 troy ounces (vs. 16 oz in avoirdupois). Not commonly used in modern trading.
⚠ Warning
A troy ounce is about 10% heavier than a regular ounce. If someone offers to sell you gold priced “per ounce” without specifying troy, clarify immediately — the difference could mean overpaying or receiving less gold than expected.
Purity and Quality
Assay: A test to determine the purity of gold. An “assay certificate” confirms the metal content of a bar or coin.
Bullion: Investment-grade gold (and other precious metals) in the form of bars, coins, or rounds. Valued primarily for metal content, not numismatic value.
Fine Gold: Pure gold content. “One fine ounce” means one troy ounce of pure gold.
Fineness: The purity of gold expressed in parts per thousand. 999.9 = 99.99% pure; 916.7 = 22 karat.
Karat (K or kt): A unit of gold purity. 24K = pure gold (100%). 22K = 91.67%. 18K = 75%. 14K = 58.5%. 10K = 41.7%. Note: different from “carat” (gemstone weight).
Melt Value: The value of the pure metal content of an item calculated at current spot price. Formula: weight (troy oz) × purity × spot price.
Millesimal Fineness: The modern system for expressing purity in parts per thousand. 999.9 = four nines fine; 999 = three nines fine; 995 = minimum LBMA Good Delivery standard.
Products and Forms
American Gold Buffalo: A 1 oz, 24K (999.9 fine) gold coin issued by the United States Mint. Legal tender at face value of $50, worth significantly more at current gold prices.
American Gold Eagle: A 1 oz, 22K (91.67% fine) gold coin issued by the United States Mint. Contains exactly 1 troy oz of gold despite the alloy. Legal tender face value: $50.
Canadian Maple Leaf: A 1 oz, 24K (999.9 fine) gold coin issued by the Royal Canadian Mint. One of the world’s most popular investment coins.
Good Delivery Bar: A gold bar meeting the London Bullion Market Association (LBMA) standards: approximately 400 troy ounces, 995+ fineness, from an approved refiner. The standard for central banks and institutional trading.
Krugerrand: A 1 oz, 22K (91.67% fine) gold coin issued by the South African Mint. The first modern bullion coin (1967). Lacks “legal tender” status in some countries.
Numismatic Coin: A coin valued for its rarity, historical significance, or condition beyond its melt value. Not suitable as a pure bullion investment without expertise.
★ Important
For investment purposes, stick to bullion coins and bars valued by metal content. Numismatic coins require specialized expertise to value correctly, and unscrupulous dealers frequently use them to charge enormous markups.
Round: A gold disc minted by private mints (not government mints). Looks like a coin but is not legal tender. Often carries lower premiums than government coins.
Accounts and Ownership Types
Allocated Gold: Gold held in a vault that is specifically assigned to you. The gold is yours even if the vault operator fails. Each bar is identified by serial number and weight.
Certificate of Title: A document proving ownership of allocated gold stored at a vault or financial institution.
ETF (Exchange-Traded Fund): A fund that trades on a stock exchange. Gold ETFs typically hold physical gold and issue shares representing a fraction of that gold.
Gold IRA: A self-directed Individual Retirement Account holding IRS-approved physical gold (or other precious metals) in an approved depository.
Unallocated Gold: A gold account where you have a claim to a certain amount of gold but specific bars are not assigned to you. The institution can meet your claim from a pool of gold. More counterparty risk than allocated.
ℹ Note
Allocated gold is yours even if the vault operator goes bankrupt — your bars are identified and segregated. Unallocated gold makes you an unsecured creditor if the institution fails, meaning you could lose everything.
Market Participants
Bullion Bank: A major financial institution that trades large volumes of gold, often acting as market makers and providing financing for the gold industry. HSBC, JPMorgan, and UBS are prominent bullion banks.
Custodian: An institution that holds gold on behalf of an investor or fund. For Gold IRAs, the custodian manages the account; the gold is held at a depository.
Dealer/Bullion Dealer: A company that buys and sells physical gold products to the public. May be a large online retailer (APMEX, JM Bullion) or a local coin shop.
Depository: A secure, insured vault facility that stores physical gold on behalf of investors. IRA gold must be held at an IRS-approved depository.
Mint: An organization that produces coins and bars. Government mints include the US Mint, Royal Canadian Mint, Perth Mint, and Royal Mint (UK). Private mints also produce bars and rounds.
The three most important terms for new investors: spot price (the base price), premium (what you pay above spot), and troy ounce (the unit of measurement). Master these three and the rest will follow.
Technical and Trading Terms
COMEX: The Commodity Exchange in New York, part of the CME Group. The primary exchange for gold futures trading. Sets much of the global gold price.
LBMA: London Bullion Market Association. The international trade association for the gold and silver market, setting standards for Good Delivery bars.
Lease Rate: The interest rate charged to borrow gold. Negative lease rates can occur when demand to lend gold exceeds demand to borrow.
SIFO (Swap Implied Forward Rate): The interest rate implied by gold forward and spot prices. Used in professional gold trading.
Streaming Company: A company that provides upfront capital to mining companies in exchange for the right to buy gold at a fixed price in the future. Different from a mining company — streamers have lower risk and often better margins.
World Gold Council (WGC): An industry organization for gold producers. Publishes research on gold demand, supply, and investment trends. Their quarterly Gold Demand Trends report is widely cited.
This glossary is updated regularly. If you encounter a term not defined here, please contact us.