Physical Gold Storage – How?
“Unallocated”, “allocated”, “segregated”, or “allocated and segregated”.
These terms describe the type of storage and the legal relation the gold owner has to their purchased gold. It is therefore important to know the differences in order to purchase your gold through the correct channel bearing in mind the end-objective of your gold / investment.
UNALLOCATED Gold Storage
Also referred to as ‘Bank Gold’. Unallocated gold basically remains the property of the bank (or security storage companies, pool account providers, fabrication businesses, etc.) and you as an investor are essentially a creditor of the bank. This is the most widely traded form of gold and on which the ‘spot’ price is based.
Although unallocated gold is the most widely traded, it does have its downside future implications.
Once you have concluded your deal you are provided with a Certificate or a Purchase Confirmation stating that you now own 25 kg, for example, of physical gold that is safely stored with the bank. On the other hand, you may even open a gold account with the bank into which these 25 kg of gold are credited, without value, since value changes.
Your certificate or gold account does not include any bar numbers, i.e. no specific bar numbers from the banks’ gold stock have actually been allocated to you as the new owner. Physically speaking, the bank did not actually sell you any gold. The bank only sold you the right on any 25 kg of the banks’ stock of gold.
Thus, if at some point you wanted to collect your physical gold and take it elsewhere you would not be able to because you do not legally own any particular bars (only the “rights” on them). The assets in fact remain assets of the bank. Naturally, banks like to do this in order to meet various fiscal regulations and as gold is equally liquid to cash money, they can easily use this when calculating various capital adequacy ratios.
Should the bank go into insolvency, your gold is most likely at risk too for that sake and will become part of the liquidation trust, for example.
ALLOCATED Gold Storage
With allocated gold you actually become the outright owner of your purchased 25 kg of gold, as per the example above. The serial numbers of your gold bars will be on your certificate or your gold account confirmation, stored together with the bank’s general gold stock.
With this form you would actually find your owned gold bars in the bank’s vaults down below.
On the other side, you could actually rent your own safety deposit box at the bank and store your 25 kg of gold therein. Most banks will not necessarily suggest this option and will also dissuade you from doing this for reasons that your gold is much safer in their own vaults with the added benefit of their insurance cover. A bank would much rather keep your gold in their own assets. Accountancy leaves this open to allocate the gold as both the bank’s assets and your own.
Allocated gold is a more secure form or gold investment as you have the tangibility of the physical gold as well as the security of actually owning the gold.
SEGREGATED Gold Storage
Segregated implies that your 25 kg of gold are stored in a truly separated and clearly distinguishable location away from other owned gold bars.
Your gold bars are basically moved out of the bank’s or security storage company’s own stocks, placed in a separate safety deposit box that is marked and identifies you as the outright owner. Often, in fact they should be, these boxes are sealed and your certificate or gold account will show the seal numbers of the respective box(es). This means that you actually receive the exact same amount of gold you put into storage as when you take them out again.
Segregated is therefore a safer way for you as the owner to have your gold as part of your assets solely protected against third party claims or insolvency of the bank or security storage company for example.
SEGREGATED AND ALLOCATED Gold Storage
As the term explains, your 25 kg of gold are both separated from any other gold and your specific gold bars are allocated to you being the lawful owner of those 25 kg. This is the most sophisticated and secure from of physical gold storage.
Upon conclusion of the purchase of your 25 kg your confirmation will include both the box seal numbers as well as the serial numbers of your bars – unmistakably defined and distinguishable.
With segregated and allocated your gold bars are fully and legally-owned by you. This may be a pre-requisite if you are looking to insure your gold under your name or you may require this for tax declaration purposes.
To unlock the full investment potential of your physical gold, this form is no doubt the safest form of storage to use to especially hedge against counterparty and credit/insolvency risk through full private ownership and often with 24/7 access to your gold.
The above does not come without a price and each form of physical storage results in different level of expenses; the more sophisticated, the more operative expenses are involved. This will be discussed in another article.
Information for readers from the Middle East and other Muslim countries: Segregated and allocated storage, in the name of the client, is the only form of storage that is Shari’ah compliant.
Why LIEMETA ME LTD?
Liemeta ME Ltd, Nicosia, Cyprus, provides physical storage of precious metals at its prime location in Liechtenstein as well as trade services of precious metals, mainly Gold, Silver, Platinum and Palladium.
Your precious metals are safely and securely stored “segregated and allocated” and we are one of the few physical storage houses for precious metals that provide full-cover insurance including embezzlement.
Your stored asset is fully legally owned by you, client assets are of course not on our companies’ balance sheets.
We are a privately owned, independent and non-bank company, meaning that our services do not fall within the scope of CRS or AEOI.
We provide 100% discretion, 24/7 access to your stored assets at our sophisticated unit and high-security building.
You are welcome to contact us through the below contact form.
We do not offer investment advice:
This information is provided solely for general information and educational purposes. It is not, and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell.