ScotiaMocatta Precious and Base Metal

Glossary of Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Scotiabank may decide from time to time to review and change the Glossary, but is not under any obligation to do so. Scotiabank is not responsible to any viewer or person for his/her/its use of any of the Glossary information or any consequences (direct or indirect) arising from any use.

A

Ag     
The chemical symbol for silver.

Alchemy 
The search throughout history for a chemical process that would turn Base Metals into gold. 

Allocated Gold 
Gold bullion held by a bank on behalf of the owner. The gold is separated from other metal that may be held by the bank and is identified by its unique bar numbers. See Unallocated Gold.

Alloy 
Gold which has been mixed with another metal to provide certain characteristics, (such as colour or hardness) is known as an alloy. Common alloys used in the jewellery industry are 22 carat, 18 ct, 14 ct & 9 ct. Pure gold is 24 carat.

Alluvial Gold 
Gold nuggets and particles which are found in rivers and streams and are recovered by dredging or panning methods.

Approved Refiner 
One of a select group of refineries whose metal production is seen as meeting minimum standards for purity and appearance, and whose bars are accepted for delivery against contracts on Futures Exchanges and on the "Spot" market.

Assay     
The act of testing gold or silver to determine its purity.

Au     
The chemical symbol for gold.

B

Bar 
A generic term for a bar of gold or silver. Typically 400 oz gold or 1,000 oz silver, but can come in various sizes. See Kilobar, TT Bar.

Base Metal 
Typically a metal from the group; Copper, Aluminium, Nickel, Tin, Zinc & Lead.

Bear 
Someone who believes prices are going to fall. A Bear "claws the market down".

Bid
The price at which a market maker is prepared to buy bullion.

Bull
Someone who believes prices are going to rise. A Bull "tosses the market up".

Bullion    
A generic term for gold & silver.

C 

Call Option 
The buyer of a call option has the right, but not the obligation, to purchase an agreed quantity of an underlying commodity at an agreed price some time in the future. See Put Option.

Carat 
A unit of measurement used to describe the purity of gold. Pure Gold is defined as 24 Carat (Karat). Common purities used in Jewellery are 9K, 14K, 18K.

Certificate 
A common instrument issued by Banks to signify ownership of a quantity of unallocated metal. The benefit of a Certificate is that it negates the need for an investor to hold physical metal. Scotiabank offers Certificates in both gold and silver.

Comex 
Commodity Exchange (New York), a division of the New York Mercantile Exchange, (NYMEX). Metals traded on Comex include gold, (100 oz contract), & silver, (5,000 oz contract).

Contango 
A situation occurring in the 'forward market' where prices for future delivery are higher than prices for early delivery. Similar to an interest rate on a bank deposit.

Cut-off Grade 
The lowest grade (contains ounces of gold per tonne of ore), specific to a mine, that allows a company to extract metal economically.

D

Delivery Date 
A date agreed between a buyer and a seller for delivery of metal and payment of same. See Forward.

Dore    
Impure gold bullion which has yet to be refined.

E

Extraction    
The act of mining ore from a mine.

F

Face Value 
The face value of the coin is the legal tender value of a bullion coin. It is the minimum value guaranteed by the issuer but does not necessarily reflect the current market value.

Fine Ounce 
A descriptive measurement for gold which has a minimum purity of 99.5%

Fine Weight
The actual "contained gold" weight of a bar or coin.

Fineness
The purity of a gold bar expressed as a decimal, e.g. 0.995.

Fix 
The London Gold Fixing. A meeting of representatives from Bullion Banks, (Fixing members), at 10:30 a.m. and 3:00 p.m. each day to determine (fix) a benchmark value for gold that is used to settle various contracts between buyers and sellers. Scotia Mocatta, Scotiabank's precious metals division, is the oldest member of the London Gold Fixing, as well as the Chairman. This is the first time in the Fix's eighty-five year history that a non-British bank has held this position.

Forward  
A bullion transaction which settle in greater than two business days time. See Delivery Date.

Futures Contract
A contract entered into on a Futures Exchange. See Comex, TOCOM.

G

Gold Standard 
A form of monetary system which existed at various times up until 1971. The basis for the system is one where a country's currency is backed up by physical bullion and where the notes and coins of a country can be exchanged for the underlying metal.

H

Hallmark 
A mark or impression made on gold or silver jewellery by an authorized Assayer which states the purity of the particular item.

Hedge 
The act of locking in a known purchase or sale price for a future contract to protect against an adverse movement in the underlying price. E.g. gold producers hedge against falls in the gold price by selling before metal is produced, while a manufacturer may hedge against an increase in costs of materials, (gold), by buying ahead of the actual need for the metal.

I

Ingot    
A generic term used to describe a gold or silver bar.

K

Kilobar 
A standard gold bar containing 1 kilogram of fine gold and traded widely around the world.

Koala
A 1 oz platinum coin minted by the Western Australian Mint in Australia. The Koala coin is 99.95% pure.

Krugerrand 
A gold coin minted in South Africa containing 1 oz of gold. The Krugerrand, minted by the Rand Refinery in Johannesburg was the first bullion coin in the world. It is unusual in that it is only 22K pure compared with other widely traded bullion coins such as the Canadian Maple Leaf, the Australian Nugget and the Chinese Panda which are 24K pure.

L

Lease 
The act of borrowing gold or silver to fund day-to-day working requirements or hedging positions. See Hedge.

Liquidity 
A reference to the ease with which trades can be made in the market without causing large swings in price. A 'liquid' market has many buyers and sellers which allows for large volumes of business to be transacted, while an 'illiquid' market can mean that small volumes of business have a tendency to push prices higher or lower quickly.

LBMA    
London Bullion Market Association.

London "Good Delivery" List 
A list of Refiners and Assayers whose gold and silver meet the minimum specifications set by the London Bullion Market Association (LBMA) required for settlement against certain bullion contracts.

M

Maple Leaf 
A 1 oz gold coin minted by the Royal Canadian Mint. The Maple Leaf is 99.99% pure. See Krugerrand, Nugget, Panda.

Market Maker 
A member company of the London Bullion Market Association who is prepared to 'make' a price to other wholesale bullion banks in order to ensure a steady supply of liquidity to the market.

Market Value
The current price at which a market maker is prepared to buy or sell bullion. See Bid.

Mint State
A previously uncirculated bullion coin in 'perfect' condition.

Mint Mark
A small mark on a coin identifying the manufacturer.

Mocatta & Goldsmid 
The oldest and one of the largest bullion banks in the world, Mocatta & Goldsmid traces its history back to 1671. Throughout history the company acted as an exclusive broker to the Bank of England and the East India Company. In 1897, Mocatta chaired the first London Silver Fixing. ScotiaMocatta, as it became following acquisition by The Bank of Nova Scotia in December 1997, continues to chair the Fixing today. As of May 2004, ScotiaMocatta has been appointed the new Chairman of the London Gold Fixing.

N

Nugget 
A 1 oz gold coin minted by the Western Australian Mint in Australia. The Nugget coin is 99.99% pure. See Krugerrand, Maple Leaf, Panda.

Numismatic Coins 
Coins collected for reasons, (e.g. rarity, historical significance), other than the value of the precious metal they contain.

O

Option    
See Call Option, Put Option.

P

Panda 
A 1 oz gold coin minted in China issued by the People's Bank of China.  The coin is 99.9% pure. See Krugerrand, Maple Leaf, Nugget.

Paper Gold 
Contracts to buy or sell gold which do not involve an actual exchange of physical metal. Paper gold could be used to describe futures contracts, options or certificates.

Physical 
Refers to actual underlying metal as opposed to a claim on the metal represented by paper gold.

Pool Account 
A precious metal account held with a bullion bank where the account holder's claim is for Unallocated Gold. This is in contrast to an Allocated account which is really just a Safekeeping arrangement.

Premium 
Commonly refers to the cost of an option and is paid by the buyer to the seller. See Call Option, Put Option. Can also refer to any dollar value over and above the London Spot price which may be charged by a physical seller to deliver metal to a market other than London. 

Pure Gold 
Gold having a purity of 24 carats or 99.99%. See Carat.

Put Option 
The buyer of a put option has the right, but not the obligation, to sell an agreed quantity of an underlying commodity at an agreed price some time in the future. See Call Option.

R

Rand Refinery 
South African Refinery based in Johannesburg which has traditionally refined all of the bullion output from South Africa's mining companies. The Rand Refinery also manufactures South Africa's Krugerrand coin.

Restrike 
Government issued gold coins on which the design and "date of issue" are constant regardless of when they are actually issued.

Royal Canadian Mint 
Government owned Canadian Refinery based in Ottawa. The RCM, a good delivery refinery, refines gold & manufactures the Maple Leaf gold coin

Royal Mint 
British Mint based in Wales. Responsible for manufacturing Britain's coinage, as well as coinage of a number of other countries.

S

Spot Price   
Market price for gold based on delivery in two business days.

Spread 
The dollar value between the price at which a 'price-maker' is prepared to buy bullion, and the price at which a market maker is prepared to sell bullion. The spread compensates the price-maker for the risk they assume on the transaction. See Bid.

Swap 
Commonly used in physical gold markets to describe a transaction entered into with another party whereby gold in one location is 'swapped' for gold in another location. The cost of the swap implies theoretical shipping, insurance, and financing costs, and also reflects demand for metal in a particular location.

T

Tael 
Traditional Chinese unit of weight. 1 tael is equivalent to 37.429 grams or 1.20337 ounces. Typical bar sizes are 5 and 10 taels of 99.00% purity.

TOCOM 
Tokyo Commodity Exchange. Futures market trading contracts of 1 kilogram of 99.99% purity gold.

Tola 
Unit of measurement used widely in India and the Middle East. One tola is equivalent to 11.1 grams or 0.375 ounces. See TT Bar.

Troy Ounce 
Unit of measurement dating back to the Middle Ages. 1 Troy Ounce is equivalent to 31.1034807 grams.

TT Bar 
Ten tola bar containing 3.746 ounces of gold. The bars are popular in India and the Middle East.

Two-Nines five (0.995) 
Gold with a purity of 99.50%. This is the standard accepted by the London Bullion Market Association, (LBMA), for delivery against "Spot" bullion contracts.

U

Unallocated Gold 
A claim on a quantity of gold bullion held by a bank on behalf of the owner. The gold is not separated from other metal that may be held by the bank. For example; a person depositing $100 in a bank account will have a claim on $100 but will not (likely) get back exactly the same banknote. See Pool Account, Allocated Gold.

V

Volatility 
The degree to which underlying gold prices change from day-to-day. Uncertainty in the market (such as the aftermath of September 11th), tends to increase the level of price volatility, while market holidays and inactive financial markets tend to lead to a reduction in volatility.

W

Wafer 
A generic term used to describe small gold bars, (usually less than 50 grams). So-called because they are thin and resemble a wafer biscuit.

Winnipeg Commodity Exchange   
North America's first gold futures exchange established in 1972. The exchange traded 400 oz contracts backed by certificates issued by Bank of Nova Scotia and CIBC. Trading eventually dried up in 1988 as Comex took over as the preeminent North American gold futures market.

World Gold Council 
An industry based organisation sponsored by a number of gold mining companies who pay an annual fee based on their level of production. The role of the World Gold Council is to promote the use of gold around the world.

Scotiabank may decide from time to time to review and change this Glossary of Terms, but is not under any obligation to do so. Scotiabank is not responsible to any viewer or person for his/her/its use of any of the Glossary information or any consequences (direct or indirect) arising from any use.