What is Allocated Gold and how Does it Work?

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There are many ways to obtain and safely store physical precious metals, including gold and silver. Opting for allocated storage can make a world of difference. It comes at a cost, but investors will receive peace of mind in exchange. 

The Appeal of Allocated Gold

No one will deny that storing gold safely and securely can be a big hassle. As a result, a lot of novice users will opt for unallocated gold storage. It is an appealing option, as it usually costs no money. At the same time, unallocated storage introduces a lot of unnecessary risks, making it a far from ideal option. 

What makes allocated gold so appealing is how it is owned by investors and stored under a custody arrangement. It is also important to note all bullion is located in a professional bullion vault. Unallocated storage, on the other hand,  is the property of the bank. There is a very big difference between the two approaches. Allocated storage deems bullion safe from a bank’s insolvency, among other things. 

Even though allocated gold is not a free option, it is worth exploring. Storing physical bullion requires space and is always subject to a fee. Thankfully, gold doesn’t take up much space, either in coin or bar format. It is a relatively inexpensive option, even if insurance tariffs come into play. 

While it is possible to obtain allocated storage through a bank, this option is best avoided. Banks want to dissuade people from owning gold, as it puts less currency reserves in the user’s bank account. There are commercial bullion vaults out there for allocated gold, and they almost always offer competitive rates.

Other Benefits to Consider

With allocated gold, there are a few other crucial benefits that shouldn’t be overlooked. 

First of all, the entity responsible for physically storing the bullion can offer a buyback service. More specifically, the owner of the gold can sell directly to the allocated storage provider. What price they will offer, depends from entity to entity. In some cases, the buyback offer can represent 97% of the global spot price. A worthwhile concept to give a second thought.  

Secondly, there is the option to pull one’s bullion out of the allocated gold storage and ask for physical delivery. More often than not, deliveries will be insured up to a certain amount. This makes it possible to opt for allocated gold during specific periods, and keeping bullion in other locations if need be. Having options at one’s disposal is always a good thing. 

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