Friday, January 8, 2016

Gold Investing Terms Everyone Needs to Know



When considering investing in gold or any other commodity, each market has specific terms that are used to describe the way each market operates. In the case of gold, there are several terms investors will encounter. They include: 

Spot Price. The spot price for gold, or other precious metals like silver, describes the value at a specific moment in time, and the price is likely to change rapidly.

Premium. While the spot price of gold may, for example, be $1000 per ounce, not all gold is available for that price. A premium may be charged for some gold coins and other forms of gold if the market demands.

Mark Up. The mark up represents the cost of the sale and a profit for the dealer. Each level of marketing can result in additional markups.

Troy Ounce. Gold and other precious metals use the troy ounce as a unit of weight. Each troy ounce equals 31.1035 grams.

Bullion. Gold bullion is sold in the form of bars or ingots and is expected to be 99.5 percent pure.

gold

Mint State. Since gold and silver coins are routinely sold, their value to collectors is enhanced when they are in mint state, meaning their condition is essentially the same as the day they were created.

Junk. Junk, or scrap, gold is generally held to be any gold that has little value in its present state and is most suitable for recycling.

Weights. Anyone interested in buying or selling gold must be familiar with the ways gold is weighed and graded. That means understanding both how actual weight is measured and how carat weight affects value.


Bid/Ask or Buy/ Sell Spread. The terms reflect the differences between quoted prices and what a buyer will actually offer. The difference can be a good indicator or a market’s current condition.

Dealer vs. Trustee vs. Custodian. Dealers market a commodity. A trustee is in a fiduciary position to buy or sell a commodity on another’s behalf. A custodian simply holds a commodity in a safe setting.

Understanding the terms and how they affect buying, holding, and selling gold is important, as each plays a role in determining the profitability of an investment in gold or any other precious metal.