Precious Metals Glossary

Gold & Silver EFPs (Exchange for Physical)

What Are the Gold EFP and Silver EFP and Why Do They Matter?

In the precious metals market, an Exchange for Physical (EFP) trade allows market participants to exchange a COMEX futures position for an equivalent position in the London OTC spot market, or vice versa. The gold EFP and the silver EFP represent the price difference, or premium, between COMEX futures and London spot prices.

Under normal market conditions, EFPs remain relatively stable, reflecting the costs of financing, storage, insurance, transportation, and the mechanics of moving metal between the COMEX and London OTC markets. However, during periods of market stress, heightened volatility, or constrained liquidity, these spreads can widen dramatically.

Some of the largest EFP dislocations in history occurred during the COVID-19 pandemic and again during periods of tariff uncertainty, when concerns over supply chain disruptions, transportation bottlenecks, and the potential movement of physical bullion into the United States caused COMEX gold and silver futures to trade at unusually large premiums to London spot prices. These episodes demonstrated how quickly structural imbalances can develop when the normal flow of bullion between global markets is disrupted.

A significant widening of the EFP, particularly when the gold EFP reached $50 to $55 per ounce or when the silver EFP traded at unusually elevated levels, often indicates that liquidity between the COMEX futures market and the London OTC market has deteriorated. As fewer market participants are willing or able to trade EFPs in size, COMEX futures can trade at increasingly large premiums to London spot prices. Strong speculative buying on COMEX can further amplify these premiums.

A persistently wide gold EFP or silver EFP, especially when accompanied by declining aggregate open interest and subdued trading volumes despite rising prices, can provide valuable insight into changing market structure. Rather than simply reflecting bullish sentiment, it may signal tighter liquidity, reduced arbitrage activity, constraints in moving physical bullion, or changing positioning by institutional market participants.

Because EFPs sit at the intersection of the futures and physical markets, they are among the most important indicators for understanding the health and efficiency of the global bullion market. Monitoring both the gold EFP and the silver EFP helps investors identify periods of market stress, evaluate liquidity conditions, and better understand the relationship between the COMEX futures market and the London OTC market. For sophisticated investors, EFPs offer a unique window into structural market dynamics that are often invisible when looking at price alone.

Allocated Gold

What Does It Mean to Hold Allocated Gold?

Allocated gold is metal held in an account with a bullion dealer or custodian in which individually identified bars or coins are credited to the account holder. Each bar is listed on a weight list with its serial number, refiner, gross weight and fineness. The holder owns the metal outright and the custodian merely safekeeps it, so allocated bars sit off the custodian’s balance sheet and are not exposed to its creditors if it fails. Storage and insurance are charged as an explicit fee.

A related structure is pool-allocated gold, in which investors hold co-ownership in a single allocated bar or in a pool of allocated bars: the position is fully backed by physical metal, but no specific bar is assigned to each investor. Allocated holdings are also the reference point for most digital gold products — when a token or a vaulted gold account claims 1:1 physical backing, what usually stands behind it is allocated metal.

Calendar Spread (Dec–Red-Dec)

What Is a Futures Calendar Spread and What Does Z6/Z7 Mean?

A calendar spread — also called a time spread or intermonth spread — is the simultaneous purchase of one contract month and sale of a different month of the same futures contract: long December 2026 gold against short December 2027 gold, for example. Traders quote the pair with month codes joined by a slash, so "Z6/Z7" is the December 2026 versus December 2027 spread (Z is the December month code and the digit is the year). Because both legs track the same underlying, outright price direction largely cancels out; what the position isolates is the difference between the two months — the shape of the futures curve.

Months in the second year out are called "red" months in trading shorthand — a convention inherited from broker board displays — so the following year's December is the "red December" and a spread such as Z6/Z7 is often described as the Dec–Red-Dec spread. In gold it is the benchmark way to trade the curve: December is the deepest contract of each year in volume and open interest, so the December-to-December spread carries most of the market's twelve-month term-structure pricing.

What the spread prices is carry — the cost of financing, storing and insuring metal from the near delivery date to the far one, with financing the dominant component for gold. A wider contango (the far month more expensive) generally tracks higher interest rates; a narrowing spread, or an inversion into backwardation, points to near-term tightness, elevated lease rates or strong spot demand. Because the two legs hedge each other, exchanges margin a listed calendar spread at a fraction of two outright positions, and executing it as a single exchange-listed spread instrument avoids the risk of legging into the two months separately.

Calendar spreads are used to express interest-rate and term-structure views without outright price risk, to position around the roll, and to arbitrage the curve against money-market rates. The risk is that the spread itself moves: delivery squeezes, EFP dislocations or funding stress can move near months violently against far ones even while the gold price itself is quiet.

CME Warehouse Stocks

What Do COMEX and NYMEX Warehouse Stocks Show?

CME Group licenses a network of commercial vaults, called depositories, to hold the metal that can be delivered against its futures contracts — gold and silver on COMEX, platinum and palladium on NYMEX. At the end of each business day the exchange publishes how much metal each depository holds, split into two categories. Registered metal has an exchange warrant issued against it and can be delivered against an expiring contract; eligible metal meets the same standards for purity, bar size, weight and approved refiner but carries no warrant, and is simply private storage. The difference is commitment, not availability — the owner of eligible metal can request a warrant at any time, often on the same business day.

Because a warrant is a decision rather than a shipment, metal moves between the two categories without leaving the vault: registered falling while eligible rises usually means someone took delivery and left the bars in storage, not that metal was withdrawn. Only a change in the total column means metal physically entered or left. Registered stocks are often set against front-month open interest as a measure of delivery capacity, but historically 97–99% of contracts are closed out before delivery, and part of the registered pile is pledged to the clearing house as performance bond. A tight reading is therefore a price signal — longs bidding for metal whose owners have not yet chosen to offer it — rather than evidence that the vaults are empty.

Contango & Backwardation

What Do Contango and Backwardation Say About the Futures Curve?

Contango describes a futures curve in which later delivery months trade above nearer ones, and backwardation the opposite. For gold, contango is the normal state: because gold is abundant, storable and lendable, a far-month future should cost roughly spot plus full carry — financing at money-market rates, vaulting and insurance to the delivery date — and cash-and-carry arbitrage keeps the curve pinned near that level. The gold curve therefore steepens and flattens largely with interest rates rather than with mine supply or fabrication demand.

Backwardation — nearer months above later ones — is rare in gold and therefore informative when it appears. It says holders are being paid to part with metal today rather than tomorrow, which typically reflects near-term physical or liquidity tightness: elevated lease rates, strong spot or delivery demand, or stress in the funding markets that finance carry. Gold backwardations have historically been shallow and brief; a persistent one is read as a meaningful signal about physical availability.

The front-to-back spread sizes total carry, and the curve's slope is what calendar spreads such as the Dec–Red-Dec trade. A useful discipline when reading the curve is to ask how much of a move is mechanical — explained by rates — and how much is not; the unexplained residual is where information about positioning, physical flows and market stress lives.

Digital Gold

What Counts as Digital Gold?

Digital gold is an umbrella term for digitally represented exposure to gold, or rights in relation to gold, created and transferred through modern infrastructure such as digital ledgers, APIs and token rails rather than through the physical handling of bars. It spans several very different products — gold certificates, gold ETFs, vaulted gold accounts and tokenised gold. What they have in common is the delivery mechanism, not the legal claim behind it.

Because the label covers such different structures, the questions that matter are legal rather than technological: what exactly does the holder own — allocated metal, a pooled fractional interest, or an unsecured claim on an issuer; is the backing independently verified; who is the custodian and under which jurisdiction; and on what terms can the position be redeemed for physical metal or cash. Two products that both describe themselves as digital gold can sit at opposite ends of that spectrum.

Futures Roll & Contract Months

How Do Contract Month Codes and the Roll Work?

Exchange symbols encode a contract's delivery month and year in a compact code: F January, G February, H March, J April, K May, M June, N July, Q August, U September, V October, X November and Z December, followed by the year's final digit — GCZ6 is COMEX gold for December 2026. Gold's actively traded months are February, April, June, August, October and December (G, J, M, Q, V, Z), with each year's December the deepest; the intervening serial months and far-out back months are listed but trade thinly.

Futures expire, so a holder who does not intend to make or take delivery must close the expiring month and re-establish the position in a later one — the roll. In the weeks before the front month's first notice day, volume and open interest migrate to the next active month, which is why the identity of the "front month" changes over time and why a chart stitched from front months needs roll adjustments. Rolling a long position in contango means selling the cheaper near month and buying the richer far one, so the roll is where the cost of carry is actually paid.

This structure is the key to reading month-by-month volume and open-interest tables: one dominant contract carries most of the activity, the other active months hold moderate open interest, and a distant contract showing only a few hundred lots of open interest is normal curve structure rather than a lack of interest in the metal. Comparing a near and a far month directly — GCZ6 against GCZ7, say — is better done through the calendar spread between them than through their headline volumes.

Gold ETF (Exchange-Traded Fund)

How Does a Gold ETF Give You Exposure to Gold?

A gold ETF is a publicly traded investment fund that provides exposure to the gold price, typically by holding physical bullion in vaults and in some cases by using derivatives, and that trades on a stock exchange like an ordinary share. Investors gain gold returns through a normal brokerage account without arranging storage, insurance or delivery. Physically backed funds publish their bar holdings daily, which is why ETF tonnage is one of the most closely watched proxies for investment demand.

Ownership is indirect: holders own shares in the fund rather than specific bars, and retail investors generally cannot take delivery — redemption in kind is normally restricted to authorised participants and only in large basket sizes. The trade-off is convenience and liquidity in exchange for a management fee and a claim that sits one step removed from the metal itself.

Gold Futures

What Is a Gold Futures Contract?

A futures contract is a standardised agreement traded on an exchange, such as CME Group’s COMEX, to buy or sell a specified quantity of gold at a predetermined price on a future date. The benchmark COMEX contract covers 100 troy ounces of gold of at least 995 fineness. Both sides post margin with the exchange clearing house, which stands between buyer and seller and removes bilateral counterparty risk, and positions are marked to market daily.

Most contracts never result in delivery — they are closed out or rolled into a later month before expiry — but the delivery mechanism, backed by registered warehouse stocks and the EFP, is what keeps futures tethered to the physical market. Futures normally trade above spot in contango, reflecting financing, storage and insurance to the delivery date, and the shape of the curve alongside open interest and volume is read as a gauge of positioning and market structure.

London Good Delivery

What Makes a Bar London Good Delivery?

London Good Delivery is the set of rules and specifications published by the LBMA describing the physical characteristics that gold and silver bars must meet for the settlement of transactions on the loco London bullion market. A Good Delivery gold bar weighs between 350 and 430 fine troy ounces — around 400 ounces, or roughly 12.4 kilograms — with a minimum fineness of 995 parts per thousand, and carries the stamp of an LBMA-accredited refiner together with a serial number, the fineness and the year of production.

The standard is what makes wholesale bullion fungible: because every accredited bar meets the same specification, bars can be traded and settled without individual inspection, provided they remain inside the chain of integrity — the network of approved refiners, vaults and carriers that preserves their provenance. Bars that leave it must be re-assayed or refined before they can re-enter. Retail-size bars, coins and the kilobars favoured in Asian markets sit outside the standard.

Unallocated Gold

What Is Unallocated Gold and What Risk Does It Carry?

Unallocated gold is a claim on gold recorded as a balance with an intermediary rather than as specific bars. The holder is owed a quantity of metal but does not own any particular metal, which makes them an unsecured creditor of the bullion bank. It is the default settlement form in the wholesale loco London market because it is cheap — there is usually no storage or insurance charge — and because it transfers by simple book entry between accounts, which makes it the workhorse of daily clearing.

The trade-off is counterparty risk: if the intermediary fails, the holder ranks alongside other unsecured creditors instead of owning metal outright. A holder who wants that risk removed can pay to have the balance allocated into identified bars. Whether a product is allocated or unallocated is the single most important question to ask of any gold holding, physical or digital.