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BACKWARDATION A market situation where the spot price trades at a premium to the forward price. Opposite of contango. Unlike the base metals, the price of gold rarely lapses into backwardation although this did occur briefly on November, 28, 1995 in the near month only.
BAHT A gold bar destined primarily for Thailand containing 0.47 ounces of 990 fine gold.
BAR Wide generic term for cast gold showing marked geographical and cultural preferences. Most standard is the 400 oz good delivery bar and the kilobar (32.15oz) both normally containing 995-999.9 parts per 1,000 pure gold. See Appendix for details.
BARRIER OPTIONS Unlike standard European options where the payoff on expiry depends only on the price of the underlying at expiration, barrier options are path-dependent. In other words, their outcome depends on the performance of the price of the underlying during the life of the option and whether that price breeches some predetermined barrier or level. See 'in' barrier and 'out' barrier options.
BEAR/BEARISH Favouring a negative view of future price movements (opposite of bullish).
BETA An investment measure of price volatility relative to other, competing, investments; in other words the measure of one commodity’s performance against others.
BINARY OPTIONS Unlike standard options which have a smooth, linear payoff profile, binary options have discontinuous payoffs (all or nothing) depending on whether or not the price of the underlying meets some predetermined condition. Binary options can be either path-dependent or path-independent.
BIS Bank for International Settlements established in 1930 as the Central Banker to the Official Sector. Based in Basle, Switzerland and holds 200 tonnes of gold for its own account.
BLACK AND SCHOLES Two mathematicians (Fischer Black and Myron Scholes) who, in 1973, pioneered option pricing theory in general and not specific to gold.
BLANK Unstamped and unmarked gold disk produced by refineries in preparation for minting coins and medallions. Also called a planchet.
BONDS Means of raising debt through the capital markets. See also Gold-backed bonds.
BOSTON OPTION see Break forward option.
BREAK FORWARD OPTION Similar to the standard call option except that it has a zero initial cost.
BREAK-OUT A technical chart development during which the gold price suddenly breaks through levels of known or expected resistance.
BULL/BULLISH Favouring a positive view of future price movements (opposite of bearish).
BULLION Originally a term implying refining or melting of precious metals including gold. Today refers to gold eg bullion trading or bullion coins and bars.
BUY SIGNAL A technical term indicating a reversal of downward price trends and that the price could well have reached the bottom in which case it would be prudent to buy gold. Contrast sell signal.
BY-PRODUCT GOLD Gold mined and produced as a consequence of mining other metals, normally copper but also lead and zinc. Gold, and often silver, produced in this way, greatly enhances the profitability of a base metal mining operation offering substantial by-product metal credits. |
