Glossary
The vocabulary this page uses, in plain terms.
- Real yield (or real rate)
- What a bond pays you after inflation is taken out. A bond paying 4% while prices rise 2% leaves you about 2% better off in buying power. This is the number gold competes with, because gold pays nothing at all.
- Breakeven
- The inflation rate at which an ordinary Treasury and an inflation-protected one would pay you the same. It is the bond market's forecast of inflation, readable straight off two prices.
- TIPS
- Treasury Inflation-Protected Securities. US government bonds whose principal rises with inflation, so the yield they quote is already a real yield.
- Haven
- An asset people buy when they are frightened rather than when they expect a return. Gold, the dollar and US Treasuries all act as havens, at different times and for different fears.
- Risk-off
- A stretch when investors sell things that might grow and buy things that probably will not fall. The opposite is risk-on. Gold usually, though not always, does better in the first.
- Positioning
- How much of a market is already betting which way. It matters because crowded bets have to be unwound eventually, and the unwinding moves the price on its own, regardless of the news.
- Managed money
- Hedge funds and similar professional speculators, as classified by the CFTC. Their net position is the most-watched slice of the futures market.
- Net long
- Bullish bets minus bearish bets held by a group of traders. A large net long means most of the money is already positioned for a rise, which leaves less buying left to come.
- Dot plot
- A chart published four times a year in which each Federal Reserve official marks where they expect interest rates to go. It routinely moves markets more than the rate decision it accompanies.
- Opportunity cost
- What you give up by choosing one thing over another. Holding gold costs you the interest you would have earned holding bonds instead — which is why real yields matter so much on this page.
- Basis point
- One hundredth of a percentage point. A move from 4.00% to 4.25% is twenty-five basis points. Usually said as bips.
- Drawdown
- The fall from a peak to a trough, usually quoted as a percentage. It answers how bad it got, rather than where it ended.
- Composite
- The single number from 0 to 100 this site produces by weighing eight forces together. Fifty is neutral. It describes conditions; it does not forecast the price.
- Backtest
- Running today's rules backwards over past data to see what they would have said at the time. Useful for checking whether a model is internally consistent. Not evidence that it predicts anything.
- Information coefficient
- A measure of how well a signal's readings line up with what actually happened next. Zero means no relationship at all. This site's composite scores negative at every horizon tested, which is published on the Track Record page rather than buried.
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