Allocated vs. unallocated gold – what’s the difference?

Although both allocated and unallocated gold are forms of investment in precious metals, the key difference lies in the nature of ownership of the metal and the level of risk to the investor.

Allocated gold refers to physical bars or coins assigned to a specific owner. Unallocated gold, on the other hand, is based on a claim—the investor has the right to a specific amount of gold, but not to specific pieces.

Below, we explain how the two solutions differ and which one offers greater capital protection.

Table of contents

• What is the difference between allocated and unallocated gold?
• What are the key features of allocated gold?
• What risks does allocated gold mitigate?
• Is allocated gold a safer form of investment?
• What are the costs of storing allocated gold?

What is the difference between allocated and unallocated gold?

Allocated gold refers to physical gold—in the form of bars or coins —assigned to a specific investor. This means that the owner holds specific pieces stored in a vault or depository.

Unallocated gold, on the other hand, is an accounting entry or a claim against a financial institution. The investor does not own specific bars, but rather the right to a specific amount of gold.

The main differences are as follows:

• forms of ownership,
• access to physical bullion,
• the counterparty risk level,
• storage costs,
• the method of accounting for the investment.

What are the key features of allocated gold?

Allocated gold is considered one of the safest ways to invest in precious metals. Investors become the owners of specific bars or coins, which are stored in professional vaults.

The key features of this type of investment are:

• physical ownership of the precious metal,
• assigning numbered bars to the owner,
• the option to collect gold,
• storage in secure vaults,
• regular inventory audits,
• often additional insurance.

This gives investors real control over their assets.

What risks does allocated gold mitigate?

The biggest advantage of allocated gold is that it eliminates the risk of default by the custodian or financial institution.

Since the gold is the customer's direct property:

• is not included in the bankruptcy estate of the bank or company,
• may not be used to cover the institution's liabilities,
• remains the property of the investor regardless of the broker's financial situation.

This is particularly important during periods of financial crisis and instability in the banking sector.

Is allocated gold a safer form of investment?

In many cases, yes. Allocated gold is considered a safer option than unallocated gold because it is backed by physical ownership of the asset.

The following factors contribute to a higher level of security:

• the physical existence of the metal,
• not dependent on the financial institution's condition,
• storage in specialized vaults,
• the ability to independently verify resources,
• greater transparency regarding ownership.

For investors focused on asset protection, this is often the preferred solution.

What are the costs of storing allocated gold?

The security of allocated gold typically involves additional storage costs. Standard fees can be around 1.5% per year, though they often drop to as low as 0.1% per year for larger volumes.

The costs typically include:

• storage in a vault,
• precious metal insurance,
• audits and inventory control,
• custody account management,
• logistics security.

For many investors, these are justified expenses, as they represent the cost of a high level of capital protection and the actual ownership of physical gold.