GLOSSARY

Entry load

It is the entry fee charged by the gold ETF when an investor wants to invest in that mutual fund. The mutual fund calculates this charge as a percentage of the Net Asset Value (NAV). For instance, if NAV is Rs.20 and the specified entry load is 2%, the cost price per unit will be Rs. 20.4.

ETF (Exchange Traded Funds)

It is an investment fund dealing in bonds, commodities etc. and gets traded on the stock market like normal stocks. A gold-backed ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. Gold-backed ETFs are financial instruments comprised of units backed by physical gold which may be in paper or dematerialised form. One gold-backed ETF unit is typically backed by 1 gram of physical gold.

Exit load

Refers to the commission paid by the investor during the time of exiting the mutual fund or Gold Exchange Traded Fund (ETF). The main purpose behind imposing the charge is to discourage investors from withdrawing from the mutual fund prematurely.

Fiat money

Refers to paper money that was made a legal tender as per law, but is not backed by metals such as gold/silver.

Field

Refers to the open area or background present on a coin.

Filigree Jewellery

It is a jewellery-making technique involving gold or silver made into tiny beads or twisted threads and arranged in artistic motifs. The wires are often fashioned into lace-like decorations adding charm to the jewellery.

Fine Weight

Fine weight is the metallic weight of a coin or bar, excluding the weight of the alloy metal.

Fineness

It is the purity of a precious metal that is measured in 1,000 parts of an alloy. For example, gold bar with fineness of 0.995 means that it has 995 parts of gold and 5 parts of another metal.

Fool's Gold

This is a phrase used for any yellow-coloured metal that may get mistaken for gold. Many pyrites such as iron pyrite look similar to gold due to their yellow sheen but do not compare to it in terms of value and hence are nick-named as fool's gold.

Futures Price

The price of a particular commodity at a set future date is called the futures price. This price is arrived at by taking into consideration, various parameters such as time till the delivery, the current spot price, risk-free interest rate and storing costs at a future date.

Gold as a hedge

Gold is the best possible hedge against inflation since the rising prices can be offset by the simultaneous rise in gold prices.

Gold Bullion Investment Trust

Investment trusts are specific companies whose primary business is investing the shareholders' funds, and whose shares are traded just like any other public company. Gold bullion investment trusts have exposure to gold bullion.

Gold Eagles

The Government of the United States initiated issuing the official gold coin known as the Gold Eagles in 1986. These come in dominations of 1/10 ounce, 1/4 ounce, 1/2 ounce and 1 ounce. The US government guarantees that each goin will contain the stated amount of actual gold weight in ounces. The obverse design is embossed a rendition of Lady Liberty by Augustus Saint-Gaudens and the Capitol building in the left background. The reverse side features a design showcasing a male eagle carrying an olive branch above a nest containing a female eagle and her hatchlings.

Gold Exchange Standard

It is a fiscal system under which a nation’s currency's exchange rate is fixed to the value of another country's currency which is convertible into gold at a stable rate of exchange. This system allows any country following it to be able to keep its currency at par with gold without the trouble of maintaining a large gold reserve.

Gold fund

Refers to a mutual fund or Exchange Traded Fund (ETF) that invests primarily in various gold manufacturing companies or gold bullion. The share price within a gold fund would closely match the spot price of gold itself. Please note that the major assumption here is that the mutual fund holds majority of its assets in gold or in stocks/bonds of gold miners/ manufacturers.

Gold futures

Gold futures are instruments that are traded on the MCX. One can buy into these gold futures in order to invest in gold. These futures contracts tend to track gold prices. Moreover, the investors have to ensure that they settle these futures contracts by pre-determining a closing date.

Gold Investor Index

The Gold Investor Index measures the number of people whose gold position rose or fell during the month.

Gold Loan

Gold loans are secured loans where gold jewellery is used as collateral. You pledge your gold jewellery with the lender and get a loan. The loan amount is usually a percentage of the gold’s value. You can repay the loan through monthly instalments. After the repayment, you get back your gold jewellery. Nationalised banks, private banks, and other financial institutions offer these loans at affordable interest rates. 

Gold monetisation scheme

The Indian government on May 19, 2015 announced that it will soon start its Gold Monetisation Scheme. As per this scheme, every Indian investor will be permitted to deposit a minimum of 30 grams of gold or jewellery in a bank to gain interest.

Gold Sovereign Bond

These are government securities with denominations in grams of gold. They are an ideal way of investing in gold without holding it in physical form. The investors have to pay the issue price of securities in cash, and at maturity, the bonds are also redeemed as cash.