If you’re new to the precious metals field, and all these specialized gold investing terms have gotten you just a little bit confused, you’re not alone! We’ve all been there, so I thought it would be a good idea to put together a little guide that might help.
So without any further ado, let’s introduce you to a few much-needed definitions, so you can proceed with confidence!
Assay: A chemical test that determines the purity of a substance. As used in precious metals investing, it’s usually applied to bars, nuggets, and ingots rather than coin. The buyer has to be sure of the purity of the metal they’re buying, so they generally have it assayed.
Bar Bullion: Bullion (see below) that has been formed into bars that may weigh anywhere from a gram to over 100 troy ounces.
Bid/Ask/Spread: Spot price characteristics (see below). Bid is what the buyers are offering; ask is what sellers are asking; and spread is the difference between the two. Gold’s spread tends to be very low percentage-wise, but the high price of gold can result in noticeable differences between bid and ask on a dollar-scale.
Bullion: Physical metal in lump form, minted for easy transport and storage. It may take the form of coin bullion or bar bullion. Ingots (see below) aren’t usually considered bullion per se.
Coin Bullion: Bullion minted in round coin shapes, often with legal tender value for trade purposes. It usually has no collector value, and may be either simple or ornate.
ETF: Exchange Traded Fund. This is a publicly traded fund in which you buy shares in gold but never actually hold any physical metal.
Fineness: A measure of precious metal purity in parts per thousand. The maximum possible fineness is .999, even if the gold is completely pure.
Gold Eagles: A series of 22-karat gold bullion coins struck by the United States Mint. Copper and silver are added to harden the gold, and the weight is adjusted accordingly. American Gold Eagles, which come in tenth-ounce, quarter-ounce, half-ounce, and one ounce sizes, are backed by the U.S. government in terms of purity and content.
Ingot: A large bar of metal, usually poured at the mine or smelter for easy transport. Ingots may weight several hundred pounds (troy or U.S., your choice), and should always be assayed before purchase.
Karat: A measure of gold purity in parts per 24. Normally used for jewelry.
Mining Stock: A publicly traded stock in a gold mining company. Similar to an ETF, except that it focuses on a single company.
Purity: The amount of precious metal in an alloy. Purity may be measured in karats (parts per 24; gold only), percentage (parts per hundred), or fineness (parts per thousand).
Rounds: Coin bullion.
Spot Price: The price of a precious metal right this minute. With widespread electronic trading, this is easy to determine.
Troy Ounce: A specialized unit of weight for precious metals equivalent to 1.097 U.S. (avoirdupois) ounces, or 31.1 metric grams. There are 12 troy ounces to the troy pound, and 14.58 to the U.S. pound.
We hope you’ve enjoyed this brief introduction to gold investing terms—and if there’s anything we missed, don’t hesitate to let us know by commenting below.