Glossary - Bullion Investments | Royal Mint Bullion

Glossary: Bullion investments

Below is a selection of keywords and phrases that you're likely to see or hear when investing in gold bullion and other precious metals.


The earmarking in a vault of a specific quantity of gold, either bars or coins, for a particular owner. The opposite of unallocated gold, where Bullion remains the property of the vendor.


Allocated gold or silver

Allocated gold or silver is physical Bullion stored in a professional vault which belongs to the owner outright. Allocated metal does not feature on the vault provider's balance sheet. It isn't exposed to their financial performance, because it is not an asset of that company. Allocated gold or silver Bullion is the owner's personal property, held under a custody (or 'safekeeping') arrangement.



The process whereby gold is tested for purity to ensure it meets the standard required.



Gold, or silver, when being treated as a monetary asset as opposed to being used for jewellery or industrial purposes. The standard of Bullion is defined in terms of the purity of the metal and its mass.


Bullion banks

These are investment banks that handle wholesale transactions in gold and are members of the London Bullion Market Association (LBMA).


Bullion coins

These fall into two main categories, those that are legal tender in the UK and those that are not. The Sovereign, Britannia and Lunar coins are legal tender, thus are exempt from Capital Gains Tax in the UK. Bullion coins such as the South African Krugerrand are not legal tender in the UK and do not enjoy this privilege. Bullion coins should not be confused with the commemorative coins and medals that are of interest to specialist collectors.


Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is a tax levied in the UK on the profit made on the disposal of assets. It differs from Income Tax in that only the gain is taxable.



A measure of the purity of gold. It's scaled 1 to 24 with one carat being 1/24 pure gold and pure gold being 24 carats.


Face Value

The face value of a coin is the amount that has been struck onto the surface, the denomination that the coin has been given. This can differ from a coin’s metal value, in particular for commemorative coins.


Fine Gold

Whilst the purity of gold is generally measured in carats, gold coins and bars are measured in fineness. A 999 fine gold coin means that the coin is 99.9% pure gold.


Fine Silver (known as 999 fine silver)

Silver is measured in fineness. Pure silver is considered to have a minimum fineness of 99.9%.



Where the purity of gold jewellery is measured in carat, gold coins and bars are measured in fineness. Near-pure 24-carat gold is equal to 999.9 parts per thousand, known as "999.9 fine".


Gold ETFs

An “exchange-traded fund” usually backed by physical gold that is traded on the stock market and tracks gold movements.


Gold reserves

Countries may no longer back their paper currencies with gold (see gold standard), but central banks remain major owners of gold. It sits in their vaults alongside so-called reserve currencies – such as dollars, euros, sterling and yen – in case of emergency. Unlike the reserve currencies, gold depends on nobody’s promise to pay, thus is seen as the “asset of last resort”.


Gold Standard

A system in which national currencies are explicitly backed by gold. Until 1914, this system was based in London, which remains the world’s premier gold market. A revived gold standard after the First World War broke down under the pressure of the Great Depression, but in 1944 a version was revived under which currencies were linked to the US dollar which in turn was linked to gold at $35 a Troy ounce. This system collapsed in 1971, and in 2000, Switzerland became the last major country to end gold backing for its currency issue.


Good delivery bar

A bar of gold traded on the London market that is at least 995 parts per 1,000 “fine gold”. The “good delivery list” of new and existing refiners that meet this high standard is the central job of the London Bullion Market Association.



Financial hedging is where a company or an investor looks to reduce or eliminate their exposure to an asset they already own. This can be done by taking an equal and opposite position using futures contracts. An owner of gold, fearing a price drop ahead, could sell futures contracts that will rise in value if gold falls. That profit offsets the loss, creating the 'hedge'.



Inflation is characterised by widespread and continued price rises that reflect a loss of purchasing power in a currency. What can be bought with £100 today, for instance, is much less than could be bought 20 years ago.


Legal tender

Strictly speaking, money that can be used in settlement of debts. Profits made on the sale of Bullion coins that are legal tender in the UK are exempt from Capital Gains Tax.


London Bullion Market Association – LBMA

The London Bullion Market Association (LBMA) represents the wholesale gold and silver market worldwide. Its members provide the banking, dealing, vaulting and transport services which buyers and sellers need to trade large gold portfolios efficiently.


London Gold Fix

This is a misleading name, as the twice-daily “fix” does not oblige anybody to buy or sell at that price. Representatives of five of the big Bullion banks jointly judge where they believe the balance point is of supply and demand in the morning and afternoon “fix”, Monday through Friday. The resulting price is used, voluntarily, as a benchmark for contracts and deals all across the world. Currently, the gold-fixing banks are Scotia-Mocatta, Barclays Capital, Deutsche Bank, HSBC and Societe Generale.



The obverse of a coin is the front, top, or “heads” side of a coin, usually bearing a portrait of the current monarch. The opposite of the reverse side.


Paper Gold

Certificates that can be converted into gold at the offices of the issuer of the paper, private or government. With paper gold, you don't own the gold; you own a promise to receive physical gold. Paper gold is often used in exchange since it is much less cumbersome than the actual metal.



Coins struck to ‘Proof’ standard are the highest quality commemorative coin produced by any mint. It is common for Proof coins to have a highly polished mirror finish on the ‘table’, and a frosted finish on the ‘relief’.



The reverse of a coin is the back, bottom, or “tails” side of a coin; the opposite of the obverse, or “heads” side.


Royal Proclamation

A Royal Proclamation is an official declaration by the King or Queen in council. Under the Coinage Act 1971, The Royal Mint has the power by Proclamation, with the advice of its Privy Council, to determine the denomination, design, dimensions, weight and fineness of coins to be made at the mint. The Royal Mint also has the power, with the advice of its Privy Council, by Proclamation, to direct that any coin shall be legal tender for the payment of any amount.


Spot Price

The spot price is the current market price at which an asset is bought or sold for immediate payment and delivery. The price is determined by the latest trades on the futures market as well as over the counter markets.


Troy ounce

One troy ounce is the standard unit used for weighing and pricing precious metals. Coming from Troyes in France, the troy ounce is not the same as an imperial ounce, weighing 1.097 times as much. The troy ounce is used to quote benchmark prices in the London physical and New York futures market. Gold is priced in US dollars per Troy ounce.


Unallocated gold

Unallocated gold is a bookkeeping device by which a bank or other enterprise provides you with notional gold. The gold is a liability to you on their balance sheet. It is synonymous with gold 'accounts' and its holders are unsecured creditors.


Value-added Tax (VAT)

VAT is a tax that’s charged on most goods and services that VAT-registered businesses provide in the UK. VAT is usually levied on the sale of most goods and services, at a rate of 20 per cent. The purchase of gold Bullion coins is free of VAT.



A secure space where items of value can be stored. Vaults are designed to protect their contents from theft, unauthorised use, fire, natural disasters, and other threats.


Working Day

A day on which one usually works. In the UK this is typically Monday to Friday excluding Bank Holidays.


World Gold Council

The World Gold Council is the market development organisation for the gold industry. Its 23 members comprise the world's leading gold mining companies, representing approximately 60% of global corporate gold production. The World Gold Council's purpose is to provide industry leadership, whilst stimulating and sustaining demand for gold.

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