What Allocated Storage Means
In an allocated account, specific, individually identified bars or coins are assigned to you. Each bar has a unique serial number, weight, and assay recorded against your name. The metal is physically segregated from other customers’ holdings, either in a separate compartment or clearly tagged within a vault.
You own those specific bars. They appear on the depository’s register as your property. The depository is a bailee, a custodian holding your property, not a debtor. This legal distinction is critical.
If the depository goes bankrupt, your allocated metal is not part of the bankruptcy estate. It is your property, held in custody, and must be returned to you. Creditors of the depository have no claim on it, any more than a dry cleaner’s creditors could claim your suit.
Allocated storage typically costs 0.5-1.5% of metal value per year, with minimum annual fees of $100-$250 depending on the facility. Some depositories charge a flat rate per bar or per ounce rather than a percentage. See the depository comparison guide for specific facility pricing.
What Unallocated Storage Means
In an unallocated account, you have a claim on a pool of metal. No specific bars are assigned to your name. The provider owes you a quantity of metal, say 10 ounces of gold, but does not designate which particular bars back that obligation.
You are a creditor, not a property owner. The provider has a contractual obligation to deliver metal on demand, but the metal in their vault is their property, not yours. This distinction has enormous legal consequences.
Unallocated storage is cheaper: typically 0-0.5% annually, with some programs charging no storage fee at all. The provider offsets costs by using the pool of metal for its own purposes, lending it, trading against it, or using it as collateral.
The Bankruptcy Risk
This is the single most important concept in precious metals storage. In an allocated account, your metal is your property. In an unallocated account, your metal is the provider’s property and your claim is a debt owed to you.
If the provider goes bankrupt:
- Allocated: Your metal is returned to you. It sits outside the bankruptcy estate.
- Unallocated: You become an unsecured creditor. You stand in line with every other creditor, trade vendors, landlords, employees, and receive pennies on the dollar after secured creditors are paid. You might recover 20-50 cents on the dollar, or less.
This is not theoretical.
The MF Global Cautionary Tale
In October 2011, MF Global, a major futures brokerage, declared bankruptcy. The firm had $6.3 billion in customer funds that were supposed to be segregated. Instead, management had used approximately $1.6 billion of customer funds to cover the firm’s own losing bets on European sovereign debt.
Customers with segregated (allocated) accounts eventually recovered most of their funds after years of litigation. But the process took over two years, during which customers had no access to their money while gold and silver prices moved significantly.
MF Global was a futures brokerage, not a metals depository. But the principle translates directly: when an institution mixes your assets with its own balance sheet (as unallocated accounts do by definition), your assets are at risk if the institution fails.
Pool Accounts: Convenience vs. Risk
Several well-known providers offer pool-type unallocated accounts:
Kitco Pool allows purchasing gold, silver, platinum, and palladium stored in unallocated pool form. No specific bars are assigned. Kitco’s terms explicitly state that pool account holders are unsecured creditors.
Perth Mint Unallocated is backed by the government of Western Australia, which provides a sovereign guarantee. This substantially reduces (but does not eliminate) credit risk. The Perth Mint’s unallocated program is one of the few where the credit quality of the counterparty arguably justifies the unallocated structure.
BullionVault and GoldMoney operate differently, storing metal on an allocated basis with daily reconciliation and published bar lists. Despite being online platforms, they function as allocated storage. Verify current terms before assuming this is still the case.
Pool accounts make sense for small holdings (under $5,000) where allocated storage minimums are disproportionately expensive. They do not make sense for core, long-term precious metals holdings where counterparty risk defeats the purpose of owning physical metal.
Cost Comparison
For a holding of 10 oz gold (approximately $20,000 at $2,000/oz):
| Factor | Allocated | Unallocated |
|---|---|---|
| Annual storage fee | $100-$300 (0.5-1.5%) | $0-$100 (0-0.5%) |
| Setup/transaction fee | $0-$50 | $0-$25 |
| Insurance | Included in most facilities | May not cover you (it’s their metal) |
| Legal status in bankruptcy | Your property | Unsecured creditor claim |
| Audit trail | Serial numbers, bar list | Pool balance statement |
| Liquidity | Same-day to 3-day settlement | Often same-day |
The annual cost difference on $20,000 of gold is roughly $100-$200/year. That is the price of legal certainty about ownership. For a holding intended as long-term portfolio insurance, the cost is trivial relative to the risk being mitigated.
For larger holdings ($100,000+), the cost gap widens in absolute dollars but becomes easier to justify. Insurance premiums on a home protect against a low-probability event; allocated storage fees protect against a low-probability event (custodian bankruptcy) with similarly catastrophic consequences.
When Each Makes Sense
Choose Allocated When:
- Precious metals are a core portfolio holding (5-10%+ of net worth)
- The holding will be maintained for years or decades
- Eliminating counterparty risk is a primary investment objective
- Holdings exceed $10,000
- The metals are held in a self-directed IRA (IRS requires allocated, segregated storage)
Choose Unallocated When:
- Building a small position incrementally (under $5,000 total)
- Using a pool account for dollar-cost averaging with small monthly purchases
- The counterparty has exceptional credit quality (e.g., Perth Mint with sovereign guarantee)
- The holding is short-term or tactical, not a permanent position
- You accept and understand the creditor risk
The Hybrid Approach
Some investors start with unallocated pool accounts while building a position, then convert to allocated storage once they reach a threshold (typically $5,000-$10,000). Most pool account providers offer conversion to allocated status for a one-time fee. This approach minimizes costs during the accumulation phase while securing ownership for the long-term hold.
For those weighing whether to store at home versus in a depository at all, the home storage guide covers the tradeoffs of keeping metals in your own possession.
Reading the Fine Print
Before opening any storage account, read the terms of service with specific attention to these clauses:
Ownership language. Allocated accounts should use words like “bailment,” “custody,” “segregated,” and “your property.” Unallocated accounts will use words like “creditor,” “obligation,” “owed,” and “pool.” If the terms are ambiguous, ask the provider directly: “In the event of your bankruptcy, are my metals part of the bankruptcy estate or my separate property?” The answer determines everything.
Rehypothecation clauses. Some unallocated agreements explicitly grant the provider the right to lend, pledge, or otherwise use the pool metal. This is legal if disclosed, but it means your metal may not physically exist in the vault at any given time. The provider has an obligation to deliver equivalent metal on demand, but obligations and physical metal are not the same thing.
Force majeure provisions. These clauses describe what happens during extraordinary events (war, natural disaster, government action). Some contracts release the provider from delivery obligations during force majeure events. For allocated accounts, the metal still exists and belongs to you regardless. For unallocated accounts, a broad force majeure clause could mean delayed or denied access precisely when you most want it.
Fee change provisions. Confirm whether the provider can change storage fees with notice, and how much notice is required. Some contracts allow 30-day notice fee increases; others lock rates for the contract period.
Frequently Asked Questions
How do I verify that my allocated metal actually exists?
Reputable depositories provide bar lists showing serial numbers, weights, and assay details for your specific holdings. Request this documentation annually at minimum. Some depositories allow scheduled visits for physical inspection. Third-party audits (typically annual) provide additional verification. If a provider cannot or will not produce a bar list for your allocated account, that is a serious red flag.
Can a depository lend out my allocated metal?
Not legally. Allocated metal is your property held in bailment. Lending it without your explicit consent would be fraud, equivalent to your storage unit facility renting out your belongings. Unallocated metal is a different matter; the provider can and typically does use pool metal for its own purposes, which is how they subsidize lower fees.
Is allocated storage required for a precious metals IRA?
Yes. IRS regulations require that IRA-held precious metals be stored in an approved depository in segregated or allocated form. Unallocated or pool accounts do not satisfy IRS requirements. The depository must be a qualifying trustee or custodian. This is non-negotiable for tax-advantaged precious metals holdings.