Allocated vs Unallocated Gold: The Distinction That Saves Investors in a Crisis

The distinction between allocated and unallocated precious metals storage is the single most important concept in vault investing. Most retail products default to unallocated, most retail customers do not understand the difference, and the difference becomes existential in a banking crisis.

Unallocated explained

An unallocated gold account is a claim on a quantity of gold, not a claim on specific bars. Your name is on the bank's ledger as being owed, say, 100 ounces of gold. The bank has gold in its vault, but no specific bars are reserved for you. You are an unsecured creditor in the legal sense.

• No specific bars assigned
• Bank can use the metal in trading operations
• Storage fees usually waived
• Returns the metal "in kind" or in cash on withdrawal
• You rank as an unsecured creditor in bankruptcy

Allocated explained

An allocated account assigns specific, serial-numbered bars to you by name. The metal is your property held in safekeeping by the custodian. The custodian cannot use the metal for any other purpose. In bankruptcy, your bars are not part of the estate.

• Specific bars listed by serial number, weight, refiner
• Storage fees typically 50-120 basis points annually
• Bars segregated from custodian's own holdings
• Property remains yours in custodian insolvency
• Audit reports issued quarterly or annually

"The difference between allocated and unallocated is the difference between owning gold and being owed gold. Most retail customers think they have the first when they actually have the second." - LBMA market practice guide

The 1985 Lloyds case

When the firm Johnson Matthey Bankers failed in 1984, the Bank of England had to step in to honor its unallocated gold obligations. Allocated holders got their specific bars back immediately; unallocated holders waited months and received settlement at the prevailing price, not necessarily the price they had paid. The case became a textbook reference in vault law.

How to identify which you have

Read the contract. If the document does not specifically use the word "allocated" and identify bars by serial number, you have unallocated. Marketing language like "your gold" and "stored in a vault" is meaningless if the underlying contract is unallocated. BullionVault, GoldMoney, and most retail platforms offer both, but the default for the cheapest pricing tier is usually unallocated.

Where allocated actually matters

For positions under $50,000, the cost difference between allocated and unallocated is small enough that you should always pay for allocated. Above $50,000, the question becomes whether you trust the custodian's solvency, because unallocated is essentially a credit position on the custodian.

Major allocated providers

For genuinely allocated, audited storage:

• BullionVault: from $32k minimum, audited monthly
• Loomis International: Zurich, Singapore, London vaults
• Brinks Global Services: US and international
• Perth Mint Certificate Program: Australian government-backed
• Sprott Physical Gold Trust (PHYS): ETF format with redemption

Bottom line: Always read the contract for the word "allocated" and the requirement for serial-numbered bars. If a provider charges nothing for storage, you almost certainly have unallocated metal, which is fundamentally different from owning gold.