Beginner’s Guide to Gold Terminology: Bullion, Spot Price, Premiums & More
This blog gives you some key of the terms and concepts that you’ll hopefully find useful. There are instances where I refer to a term or concept that you might come across when reading about Gold, so I have tried to amend the “definition” so it relates to Gold.
Please note that these might change, so if you are relying on anything I’d suggest that you get clarity on any particular term or concept before doing anything. You must ensure that your understanding is the same as the person you are transacting with.
Here goes….
Gold Investing Glossary
Bars
Typically refers to small gold bars (1kg and below) sold at the retail level. Where identifiable, this also includes gold bought and stored via online vendors.
Central banks
Net purchases (i.e. gross purchases less gross sales) by central banks and other official sector institutions, including supra national entities such as the IMF. Swaps and the effects of delta hedging are excluded.
Comex net long positioning
The Commodity Futures Trading Commission (CFTC) publishes a weekly Commitment of Traders (COT) report that provides information on the positioning of speculative investors in the U.S. futures markets. The report gives the aggregate positions held by traders from the previous Tuesday, including the number of long contracts (that stand to benefit if prices rise) and short contracts (that benefit if they fall). The report is often used as an indicator of market sentiment regarding the price of gold: short positioning reflects bearish sentiment while long positioning reflects bullish sentiment in the gold futures’ markets.
Consumer demand
The sum of jewellery consumption and total bar and coin investment occurring within a country i.e. the amount (in fine weight) of gold purchased directly by individuals. If you are looking at World Gold Council analysis then Technology demand is not included at the individual country level, as it is measured at the point of fabrication rather than at the point of consumption.
Demand
The sum of jewellery consumption, technology fabrication, investment (bars and coins), and net purchases by central banks.
Dentistry
The volume of gold bullion or grain fabricated into products destined for dental applications such as dental alloys.
Electronics
The volume of gold bullion or grain fabricated into components used in the production of electronics, including – but not limited to – semiconductors and bonding wire.
Fabrication
Fabrication is the first transformation of gold bullion into a semi-finished or finished product.
Fineness
The measure of purity for investment gold.
Good Delivery standard: The minimum fineness (995 parts per thousand) for gold bars in the London wholesale market.
Retail-level purity: Often 999 fine (or "three-nines"), common for investment coins and kilobars.
Gold-backed Exchange-Traded Funds (ETFs) and similar
The volume of gold held in physical form by open-ended Exchange Traded Funds (ETFs) and other products such as close-end funds, and mutual funds. Most funds included in this list are fully backed by physical gold. While several funds allow other holdings such as cash, derivatives or other precious metals, we monitor only those funds investing at least 90% in physical gold and appropriately adjust their reported assets to estimate physical holdings only. For funds that include physical holdings of multiple precious metals, the total AUM depicted for such funds is lower than their actual total AUM. Over time, the data set will adapt to most accurately represent the universe of active funds.
Gold Bullion
Gold, in bar form, refined to a purity of at least 99.5%.
Jewellery consumption
End-user (consumer) demand for all newly-made carat jewellery sold at the retail level, by volume of fine gold. Measured on a gross basis (i.e. includes recycled gold). Excludes: purchases funded by the trading-in of existing carat gold jewellery (gold-for-gold exchange); and purchases of second-hand jewellery, other metals plated with gold, and coins and bars used as jewellery. At the global level, it is measured as jewellery fabrication adjusted for changes in inventories held by the trade. At the country level, it is jewellery fabrication adjusted for changes in trade stocks plus imports, less exports.
Jewellery fabrication
Jewellery fabrication is the first transformation of gold bullion into semi-finished or finished jewellery. This differs from jewellery consumption as it excludes stock building/de-stocking by manufacturers and distributors. At the individual country level, it also excludes imports or exports.
Jewellery inventory
Changes to the level of jewellery stocks along the jewellery distribution chain, this is the difference between gold fabrication and gold consumption. A negative figure represents a draw-down of stocks when consumption exceeds fabrication. A positive figure represents a build-up of stocks.
LBMA Gold price PM
Unless otherwise specified, gold price values from 20 March 2015 are based on the LBMA Gold price PM administered by ICE Benchmark Administration (IBA), with prior values being based on the London PM Fix. For more information, click here.
Medals/imitation coins
Fabrication of gold coins without a face value, produced by both private and official/national mints. India dominates this category with, on average, around 75% of the total. ‘Medallion’ is the name given to unofficial coins in India. Medals of at least 99% purity are also included.
Mine production
The volume (in fine weight) of gold mined globally. This includes an estimate for gold produced by artisanal and small-scale gold mining (ASGM), which is largely informal. For more information, click here.
Net producer hedging
The net impact in the physical market of mining companies’ gold forward sales, loans and options positions. Hedging transactions – which release gold to the market from existing above-ground stocks – accelerates the sale of gold. De-hedging – the process of closing out hedged positions – has the opposite impact and will reduce the amount of gold available to the market in any given quarter. Over time, hedging activity does not generate a net change in the supply of gold. For more information, click here.
Official coins
Net investment in gold bullion coins (i.e. gross purchases less gross sales) at the retail level. It is equal to the volume of fine gold in coins fabricated by official/national mints which are, or have been, legal tender in the country of issue. It is measured at the country of consumption rather than at the country of origin (for example, the Perth Mint in Australia, sells most of the coins it produces through its global distribution network). In practice it includes the initial sale of many coins destined ultimately to be considered as numismatic rather than bullion.
OTC and other
This number captures demand in the OTC market (for which data is not readily available), changes to inventories on commodity exchanges, any unobserved changes in fabrication inventories and any statistical residual. It is the difference between total supply and gold demand.
Other industrial
Gold used in the production of compounds, such as Gold Potassium Cyanide, for electro-plating in industrial applications as well as in the production of gold-plated jewellery and other decorative items such as gold thread. India accounts for the bulk of demand in this category.
Over-the-counter (OTC)
Over-the-counter (OTC) transactions (also referred to as ‘off exchange’ trading) take place directly between two parties, unlike exchange trading which is conducted via an exchange.
Recycled gold
Gold recovered from fabricated products, including unused trade stocks, which is refined back into bullion. This specifically refers to gold sold for cash. It does not include gold traded-in for other gold products (for example, by consumers at jewellery stores) or process scrap (scrap generated during manufacturing, which never becomes part of a fabricated product but instead returns as scrap to a refiner). For more information, click here.
Spot price and Futures price
The gold spot price is the current, real-time market price at which one ounce or gram of investment-grade gold can be bought or sold for immediate delivery and payment, reflecting real-time supply and demand dynamics and global economic factors. This price is constantly fluctuating and serves as a benchmark, differing from a Futures price.
A Futures price is an agreed price for an asset's delivery in the future, to be paid at an agreed future date; locking in the price and ignoring what the spot price will be on that future date.
Wholesale buyers and sellers therefore have two choices; they can choose to purchase now and take delivery of their gold, which would use the spot price, or alternatively they could agree on a price and take delivery sometime in the future – using a futures price.
Technology
This captures all gold used in the fabrication of electronics, dental, medical, decorative and other technological applications, with electronics representing the largest component of this category. I would expect it to include gold destined for plating jewellery.
Tonne (Metric)
1,000 kg or 32,151 troy oz of fine gold.
Total bar and coin
Total net investment in gold bars, coins and medals/imitation coins.
Total supply
The total of mine production, net producer hedging and recycling.
Final Thoughts: Building Confidence Through Knowledge
Understanding the language of gold investing is the foundation of every confident investor.
Now that you know the key terms, you can follow market updates, read reports, and explore your options without getting lost in the jargon.
Keep building your knowledge with our beginner-friendly guides and resources designed to make gold investing clear, simple, and approachable for everyone.
