Explanations of "Gold" investment-related terms A to Z

The London Bullion Market Association (LBMA) is a London-based international trade association that represents the wholesale over-the-counter gold and silver market in London. In other words, the LBMA coordinates the London gold market, as trading in that market is conducted amongst the members of the LBMA.

Founded in 1850 by three brothers. It started as a dry-goods store to become later a commodity house and eventually a house of issue. Before its collapse, it was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch). The symbol of the global financial crisis, whose collapse put the world into the Great Recession, the most severe economic downturn since the Great Depression. For some, a victim of the Fed’s decision not to rescue it. For others, the Bank of Evil, guilty of accounting frauds and responsible for the crisis. Lehman Brothers. Let’s analyze its link with gold and lessons we can learn from its bankruptcy.

The use of various financial instruments or borrowed capital to increase the potential return of an investment. Investors leverage their investments, expecting the profits made to be greater than the cost of borrowing.

The London Interbank Offered Rate (LIBOR) is the interest rate at which large global banks offer to lend funds to one another in the international interbank market. It measures the cost of funds to large institutions operating in the London financial market or with London-based counterparties. LIBOR is administered by the ICE Benchmark Administration and published by Thomson Reuters. It is calculated for five currencies (U.S. dollar, euro, pound sterling, Japanese yen and Swiss franc) and seven borrowing periods (overnight, one week, and 1, 2, 3, 6 and 12 months). The most commonly quoted rate is the three-month U.S. dollar rate.

Liquidity is an illusory concept. You see, during boom all markets look liquid. But it quickly changes during the bust. As the saying goes, liquidity is a coward as it disappears at the first sign of trouble.

The London bias is a statistical regularity showing that gold prices usually decline during London trading hours, especially around the PM Fix, whilst they rise during Asian trading hours. Another version of the idea behind the London bias is that there is a tendency for the London PM gold fix to be lower than the London AM gold fix.

The London gold fix, officially called the LBMA Gold Price is set in the London gold market twice a day: at 10:30 GMT, and 15:00 GMT, in U.S. dollars, serving as a benchmark for pricing gold. It is widely used by producers, consumers, investors and central banks.

The London Gold Market is part of the London Bullion Market, which is a wholesale over-the-counter (OTC) market for the trading gold and silver, coordinated by the London Bullion Market Association. It is a wholesale market – the usual minimum size of transaction is 2,000 ounces of gold (while the standard size is 5,000 ounces) – individual investors are practically excluded from the market. It is a decentralized over-the-counter dealer market, which means that the dealers independently quote bid and ask prices and trades, making this market less transparent.

The London Gold Pool was the pooling of gold reserves worth of several hundred million U.S. dollars by a group of eight central banks in the United States and seven European countries (Germany, the United Kingdom, France, Italy, Belgium, Netherlands and Switzerland). The cartel's aim was to defend a gold price of $35 per ounce by intervention in the London gold market. The pool became an active buyer of gold when the London price fell below $35.08 an ounce and a seller at $35.20. The central banks tried to regulate the price of gold because they wanted to assure the convertibility of the greenback into gold, which was the very basis of the Bretton Woods Agreement. For the Bretton Woods system to remain effective, the free market price of gold would have to be maintained near the $35 official foreign exchange price, since when it was higher, it was tempting for other countries to buy gold at the official price and sell it in the London gold market, which exacerbated the drain on the U.S. gold reserves.

A long period of time to hold an asset. How long is "long" depends on individual investor's perspective. For day-traders, long-term could mean a week (as they usually hold a position for a few hours or so).

Assets to be held over a long period of time. How long is "long" depends on an individual investor's perspective. For day-traders, long-term could mean a week (as they usually hold a position for a few hours or so).

Although some of our tools might use a different definition, at Sunshine Profits, we assume that long term refers to a period of at least 6 months.