Plain-English definitions of the terms you’ll meet when buying precious metals or holding them in an IRA. Links go to the guides that cover each topic in more depth.
A
Assay. A test of a metal’s purity. An assay card is the sealed card many minted bars come in, certifying the bar’s weight, purity and serial number. See gold bars.
Authorized purchaser. One of the large distributors that buy bullion coins directly from the U.S. Mint and resell them to dealers. The Mint doesn’t sell bullion coins to the public.
B
Bid and ask. The bid is the price a dealer will pay you; the ask is the price at which it will sell to you. The gap between them is the spread.
Bullion. Precious metal valued mainly for its metal content, in the form of bars, ingots or coins made for investors.
Burnished. A satin finish the U.S. Mint uses on some collector coins, marked with a “W” mint mark. Burnished coins are priced well above their metal value.
C
Cast bar. A bar made by pouring molten metal into a mold, with rounded edges and a rougher surface than a minted bar.
Collectible. For tax purposes, a category that includes coins and precious metals. Long-term gains on collectibles are taxed at up to 28%. An IRA generally can’t hold collectibles, with exceptions for certain coins and bullion.
Commingled storage. Storage in which your metal is held together with other customers’ metal of the same type. You’re entitled to the same kind and amount of metal back, not the exact pieces. Compare segregated storage.
Custodian. The bank or IRS-approved company that administers a self-directed IRA and is responsible for holding its assets. See gold IRA fees.
D
Depository. A secure vault that stores precious metals for investors and IRA custodians.
Distribution. Money or assets taken out of an IRA. Distributions are generally taxable, and may carry a 10% additional tax before age 59½.
F
Face value. The legal-tender value stamped on a coin, such as $50 on a 1 oz Gold Eagle. For bullion coins it’s symbolic and far below the metal’s value.
Fineness. A metal’s purity in parts per thousand. Gold that is 999.9 fine is 99.99% pure.
Fractional coin. A bullion coin smaller than one ounce, such as a 1/10 oz Gold Eagle. Fractional coins cost more per ounce than 1 oz coins.
G
Gold IRA. A self-directed IRA that holds physical gold or other approved precious metals through a custodian. See what is a gold IRA?
Good Delivery bar. A large bar, about 400 troy ounces of gold, that meets the London Bullion Market Association’s standards for trading between banks.
J
Junk silver. U.S. dimes, quarters and half dollars dated 1964 or earlier, which are 90% silver, traded for their silver content. See silver coins and bars.
K
Karat. A measure of gold purity out of 24. 24-karat gold is pure; 22-karat is 91.67% gold.
L
LBMA Gold Price. The benchmark gold price set twice each business day in London by an electronic auction. See the spot price of gold.
Legal tender. Money that a government recognizes for paying debts. Government bullion coins are legal tender in their home countries at their face value.
M
Melt value. The value of the metal a coin or bar contains at the current spot price.
Minted bar. A bar cut from rolled metal and struck with a design, usually sold sealed in an assay card.
Mint mark. A small letter showing which mint struck a coin, such as “W” for West Point.
N
Numismatic. Relating to coin collecting. A numismatic coin’s price depends on rarity, condition and collector demand as well as its metal.
P
Premium. The amount you pay above the melt value of a coin or bar. See what gold really costs.
Proof coin. A collector coin struck with specially prepared dies to give mirror-like fields and frosted designs. See proof vs. bullion coins.
Prohibited transaction. A dealing between an IRA and its owner, or certain related people, that tax law forbids, such as using IRA assets personally. It can end the IRA’s tax-favored status.
R
Required minimum distribution (RMD). The amount owners of traditional IRAs must take out each year once they reach the required age, currently 73 and rising to 75 for people born in 1960 or later.
Rollover. Moving money from one retirement account to another. A direct rollover goes straight between accounts; an indirect rollover must be completed within 60 days. See gold IRA rollovers.
Round. A coin-shaped piece of metal made by a private mint. It has no face value and isn’t legal tender.
S
Segregated storage. Storage in which your specific bars or coins are kept separate and returned to you. It usually costs more than commingled storage.
Self-directed IRA. An IRA whose custodian allows alternative assets, such as precious metals or real estate. The custodian usually doesn’t judge whether an investment is sound.
Semi-numismatic. A sales term for coins supposedly worth more than their metal but less than rare coins. The Commodity Futures Trading Commission calls it a made-up term with no special meaning.
Spot price. The current wholesale price of one troy ounce of a metal for immediate delivery. See the spot price of gold.
Spread. The difference between a dealer’s selling price and buying price.
T
Transfer. A move of IRA assets directly from one custodian to another. Transfers aren’t limited in number and aren’t reported as distributions.
Troy ounce. The standard unit for precious metals, 31.1035 grams, about 10% heavier than an ordinary ounce.