Glossary

Account Options

Customers who trade with The Stephen Betts Group can trade on credit subject to credit control checks. Please contact us for further information

Assay

Platinum, gold and silver may be assayed. This means that the purity of the metal is tested to protect consumers. Once an item has been assayed, it is usually hallmarked (this is done by the assay office in the UK), clearly showing the relevant standard of the metal. When dealing in bars, the hallmark gives the investor comfort that the product is genuine

Avoirdupois Ounce

The Avoirdupois system is the everyday system of weight used in the United States, and was used in the United Kingdom and elsewhere until metrication. This system is not, however, used in the precious metal industry, which utilises the troy ounce.

1 avoirdupois ounce = 28.3495 grams

Condition of Coins

Note: Grading can be described as being between two grades, ie VF-EF

Fix, The

The fix is the international method recognised and used for determining the gold price. It is based on a bizarre tradition that took place in the offices of the bank of N. M. Rothschild in London. Analysts and traders who were talking to large buyers and sellers around the world would sit in a room with a small flag which they would hold raised. They lowered the flag when they were happy with the gold price. The chairman declared the price fixed when all the flags had been lowered. This tradition has now been taken over by a panel of banks chaired by Barclays Capital. Traditionally, this price was used around the world, but with the development of other gold markets the significance of the London fix has diminished and the days trends tend to be set by the Hong Kong Market which opens eight hours earlier and services the worlds biggest consumer of the metal – China.

Futures

A future is an agreement to buy or sell a set amount of a commodity or security in a designated future month at a price agreed upon today by the buyer and seller. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction. You can close your position at any time prior to the expiry date by transacting the opposite sum on the current future price.

Gold

History

Gold is the oldest, and most trusted, investment of all. This unique metal has been prized throughout time by advanced cultures and primitive societies alike, and has been the cornerstone of the world’s economies and banking systems since they were first developed.

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Gold Standard, The

The use of gold as the standard value for the money of a country.

If a country will redeem any of its money in gold it is said to be using the gold standard. The U.S. and many other Western countries used the gold standard during the early 1900’s, but Britain abandoned it 1931; the USA followed suit in 1971, breaking the last tie between gold and circulating currency, resulting in our modern financial system which is called a “floating currency” system.

Holdings of gold are still retained because it is an internationally recognized commodity, which cannot be legislated upon or manipulated by interested countries.

Since 1976 the U.S. government no longer sets the gold value of a dollar. The price of gold rises and falls in relation to the demand for the metal. Gold coins have not been minted as legal currency since 1933.

Hedge

An investment made in order to reduce the risk of adverse price movements in a security or commodity, by taking an offsetting position in a related security, such as an option or a future

Investment metal

Gold is unique as the only metal which is classified as in ‘investment metal’. This means that purchasing Gold is seen as an investment (rather like buying shares or US Dollars) and VAT is therefore not applicable.

Although it is an investment metal, the Financial Services Authority does not class gold or other precious metals classified as specified investments, meaning that there are no specific regulatory restrictions when investing in precious metals (whereas there are for many other forms of investment).

London Bullion Association, The

London Good Del.

A good delivery bar is a 400 troy ounce (12.5kg) which has been stamped by a member tof the LBMA

Market Bar

The standard trading unit for wholesale gold dealing is the 400oz bar (12.4kg). As this is out of the reach of most private investors, a wide range of smaller bars are also available.

Options

There are two kinds of Option ; a Put and a Call. Buying a Put Option means buying the right, but not the obligation, to sell the underlying security or commodity at a defined price (the strike price) before a defined date (the expiry date). Buying a Call Option means buying the right, but not the obligation, to buy the underlying stock or commodity at a defined price before a defined date. Options differ from futures because a future is a promise to make a transaction, whereas an Option merely gives you the right to buy or sell if you wish to. The maximum downside potential for an option is the cost of the option itself (ie you do not have to buy/sell the underlying if it is not beneficial)

Platinum

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Palladium

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Postal Rates

The Stephen Betts Group uses Royal Mail’s Special Delivery for all valuable goods. Price varies depending on weight.

Silver

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Taels

The ancient Chinese unit of weight. 1 Tael = 37.429g

Tax

Tax issues (especially regarding VAT) can become a little complex and ambiguous regarding precious metals.

If in doubt, please seek advice from the Inland Revenue.

Tolas

The old Indian unit of weight .1 Tola = 11.66g

Troy Ounce

VAT

VAT of 15% is currently payable on all precious metal purchases, except for Gold, which is exempt when purchased in investment form (ie. coins or bars rather than manufactured products).

Gold is classed as an investment metal and is consequently exempt (much as you would not pay VAT if investing in US Dollars)

The necessity of paying VAT when purchasing Silver, Platinum and Palladium makes those metals prohibitively expensive as direct investments. However, it is possible to invest in these metals without paying VAT by opening an account with a spread betting company.

For detailed advice, please click here

Weight conversion table