COMMONLY USED TERMS

A glossary of commonly used terms from the the Department of Mineral Resources of South Africa’s Precious Metals Trade – General Information Handbook.

ALLOY

A solid mixture of two or more chemical elements, including at least one metal. In the case of gold, it is mixed with a base metal or metals to lower the purity, influence the colour or add durability.

ASSAY

The testing of metal to determine its fineness or purity.

ASSAY MARK

The stamp by an assayer on a bar or piece of precious metal to guarantee its fineness.

BENEFICIATION

Adding value to a mineral product.

BLANK

A blank disc of metal with milled edges used to make a coin.

BULLION

Gold, silver and PGMs in bulk trading form, e.g. bars, ingots and plate, rather than in grain or sponge.

BULLION COINS

Contemporary precious metal coins minted by official agencies in unlimited numbers for investment purposes.

CAST BAR

A bar made by the process of forming a bar in a mould (contrast minted bar).

COMEX

The Commodity Exchange in New York, a division of NYMEX.

DELIVERY

The actual transfer of the ownership of precious metal. It may not involve physical movement of metal and is usually made by a simple paper transfer in the clearing system.

DERIVATIVE

A highly leveraged financial instrument or paper product, the value of which is based on the underlying precious metal, e.g. futures contracts, gold-backed bonds and options.

DORÉ

An unrefined (therefore impure) alloy of gold with variable quantities of silver and smaller quantities of base metals, which is produced at a mine before passing on to a refinery for upgrading to London Good Delivery standard, usually consists of 85 percent gold on average.

EAGLE

The earliest legal tender US gold coin, first minted in 1795. It has a fineness of 900.

FABRICATION

The manufacturing of semi-finished or final products.

FACE VALUE

The value of a coin or paper money, as printed on the coin or bill itself by the minting authority. While the face value usually refers to the true value of the coin or bill in question, it can sometimes be largely symbolic, as is often the case with bullion coins.

FINENESS

The proportion of precious metal in an alloy expressed as parts per 1000.

FINE OUNCE

A troy ounce of “pure” precious metal.

FORWARD CONTRACT

A cash market transaction in which two parties agree to the purchase and sale of a commodity at some future date. The essential difference from a futures contract is that a forward contract is much more flexible and usually results in physical delivery.

FUTURES CONTRACT

A legally binding standard contract offered by exchanges, which allow for the purchase or sale of a specified quantity of precious metal at a pre-agreed price for future delivery at a pre-agreed date.

GOLD FIXING

Held twice each working day, at 10:30 and 15:00 GMT.

GOLD LOAN

The provision of finance in gold for a gold-related project or business, typically in mining or jewellery inventory finance, which provides a combination of generally inexpensive funding together with built-in hedging.

GOLD STANDARD

A monetary system with a fixed price for gold, and with gold coin either forming the whole circulation of currency within a country or with notes representing and redeemable in gold.

GOOD DELIVERY

The specification which a bar must meet in order to be acceptable for delivery in a particular market, e.g. London Good Delivery.

GRAIN

One of the earliest units of weight for gold, one grain being the equivalent of one grain of wheat taken from the middle of the ear.

GRANULES

Bullion, including its various alloys presented for sale in granulated form, often referred to as grain.

HALLMARK

A mark or number of marks made on jewellery and other fabricated products to confirm that the quality is of the fineness marked on the item.

HEDGE

Price risk management action using the various derivative products available. The intention is to try to even out prices by entering into contracts that balance each other out or provide protection from sudden price fluctuations. Use is made of forward sales, futures and options to afford such protection. For example, hedging may be undertaken by a mining company selling output forward or writing put options to protect against a price fall, or by a fabricator who will need precious metal for working inventory in the near future buying a futures contract or call option to insure against a price rise.

KARAT

The proportion of gold in a gold alloy, on the basis that 24 carat is pure gold, often expressed as K or k, e.g. 18k is 75 percent gold. Gold is often alloyed with silver, nickel, copper or other metals to improve its workability and make the soft metal more durable.

KILOBARS

A kilobar (1000 grams) is the world’s most widely traded small gold bar, popular among investors and jewellery manufacturers as it is normally sold at an extremely low premium above the prevailing value of its gold content.

LBMA

The London Bullion Market Association was formally incorporated on 14 December 1987 to represent the interest of the participants in the wholesale bullion market and to encourage the development of the London market in every possible way.

LBMA GOOD DELIVERY LISTS

Lists of acceptable refiners of gold and silver whose bars meet the required standard (of fineness, weight, marks and appearance) of the London Bullion Market Association.

LEASING/LENDING

The process by which holders of physical precious metal can earn a return on what would otherwise remain a non-interest-bearing asset by lending precious metal to fabricators. This lent gold provides the necessary liquidity for day-to-day transactions.

LEGAL TENDER

Legal tender is payment that, by law, cannot be refused in settlement of a debt denominated in the same currency.

LOCO

The place or location at which a commodity, e.g. loco London gold, is physically held.

LONDON GOOD DELIVERY

This an international standard in terms of which gold bars must have a minimum gold purity of 99.5 percent. Central banks normally hold gold in the form of these bars.

MAPLE LEAF

Canadian gold coin with a fineness of 999.9.

MINTED BARS

A bar punched out of a strip of metal which has been produced by continuous casting. The punched-out bar is then minted in a purpose-designed minting press, similar to the process used to make coins.

MINTED COIN

A coin punched out of a strip of metal which has been produced by continuous casting. The coin is then minted in a purpose-designed minting press.

NUMISMATICS

The specialised sector of the coin business for the study and collection of rare coins and other media of exchange, particularly those with archaeological and historic interest.

NYMEX

A US futures exchange consisting of two divisions, NYMEX (the New York Mercantile Exchange) and COMEX (the Commodities Exchange).

OPTION

An option gives the holder the right, but not the obligation, to buy or sell precious metal at a pre-determined price by a pre-agreed date, for which right the buyer must pay a premium. This premium is the cost of the option, paid to the writer or grantor of the option. The right to buy is referred to as a call option and the right to sell, a put option. The predetermined price is referred to as the strike price. The premium is calculated based on a combination of the current price of the precious metal in question, the strike price, current interest rates, time to expiry and the anticipated volatility of the gold price. Options are of two types: options offered on an exchange and OTC options granted by an individual bank or bullion dealer, which are flexible and tailored for the client’s needs. Exchange Options, on the other hand, offer a standard contract, which can be traded on the exchange many times before it expires. A PUT OPTION gives the purchaser the right but not the obligation to sell precious metal at a predetermined strike price. A CALL OPTION on the other hand gives the purchaser the right but not the obligation to buy precious metal at a predetermined strike price.

OPTION CONTRACT

Is different from an OTC as it is an exchange product offering the holder the right but not the obligation to buy or sell gold at a pre-agreed price by an agreed date.

OTC

Over-the-counter is a term used to describe an option that is written and traded through principals rather than an exchange, i.e. directly between buyer and seller.

PLATINUM-GROUP METALS (PGMs)

Six metallic elements clustered together in the periodic table. These elements are ruthenium, rhodium, palladium, osmium, iridium, and platinum. They have similar physical and chemical properties, and tend to occur together in the same mineral deposits.

PRECIOUS METALS

Metal of great value being gold, silver, and PGMs.

PRECIOUS METALS ACT

The parliamentary Act regulating precious metals in South Africa.

REFINING

The separating and purifying of gold, silver and PGMs from other metals. Precious Metals Tswane specialises in refining precious metals from primary and secondary sources.

ROLLED GOLD

The process in which a layer of carat gold alloy is mechanically bonded to another metal.

SCRAP GOLD

The broad term for any gold which is sent back to a refiner or processor for recycling. Precious Metals Tswane buys scrap metals.

SMELTING

The process of melting ores or concentrates to separate out the metal content from impurities.

STANDARD BAR

Gold bar weighing approximately 400 ozt or 12.5kg and having a minimum fineness of 995 parts per 1 000 pure gold. Silver bar weighing approximately 1 000 ozt with a minimum fineness of 999.

STERLING SILVER

Silver of 925 fineness – 92.5 percent silver and 7.5 percent copper. Also called “Standard Silver.”

SWAP

A spot sale of precious metal usually gold, with a simultaneous equal forward purchase of equal tonnage.

TAEL

Traditional Chinese unit of weight for gold, widely traded in the Far East. 1 tael = 1.20337 ozt = 37.4290g.

TOCOM

The Tokyo Commodity Exchange, established in 1984.

TOLA

Traditional Indian unit of weight for gold, 1 tola = 0.375 ozt = 11.6638g. The most popular sized bar is 10 tola = 3.75 ozt. These bars are used widely in jewellery manufacture and are traded in the Middle and Far East.

TROY OUNCE

A unit of measure equivalent to 31.1034768g traditionally used for precious metals.

WHITE GOLD

A gold alloy containing whitening agents such as silver, palladium or nickel as well as other base metals. Often used as a setting for diamond jewellery.