Allocated gold is specific bars in your name. Unallocated gold is an unsecured claim on a bank. The difference only becomes visible when something goes wrong.
Two customers hold "100 ounces of gold" with the same institution. One of them owns eight specific bars with serial numbers, weights and assay marks recorded in their name. The other owns a number on a statement.
On a normal Tuesday those positions behave identically. The price moves the same way, the statements look similar, and the second customer usually pays less to hold it. The difference appears exactly once, in the scenario neither of them expects, and at that point it is total.
This is the most consequential distinction in gold ownership and the one least likely to be explained at the point of sale.
Allocated gold is a legal relationship, not a storage preference.
When metal is allocated to you, specific bars are identified against your name on a bar list: serial number, refiner, gross weight, fineness, and fine weight for each bar. Those bars are your property. The vault holds them under a bailment or custody arrangement, which means the custodian never owns them and they never appear on the custodian's balance sheet.
The consequences flow from that single fact.
Insolvency. If the custodian fails, allocated metal is not part of the estate available to creditors. It is your property held by someone who went bust.
Identity. You can, in principle, ask for those exact bars. Not an equivalent quantity, those bars.
Auditability. A bar list can be reconciled against a physical count by an independent party. This is the basis of every serious reserve attestation in the industry.
Cost. You pay storage and insurance, typically quoted as a percentage of value per year, because real space and real insurance are being consumed on your behalf.
There is a middle tier worth knowing about. Segregated storage means your bars sit physically apart from other clients' metal, usually in a dedicated cage or compartment. Pooled allocated means specific bars are allocated to a group of clients who hold proportional title to identified metal. Both are genuine ownership. Segregated costs more and buys you separation rather than better title.
An unallocated account records that the institution owes you a quantity of gold. That is the whole of it.
No bars are earmarked. The metal backing the aggregate book may exist, may be partially hedged, may be out on lease, may be in transit. The institution runs a position against its total obligations the way a bank runs a deposit book.
You are an unsecured creditor. Not a preferred one, not a secured one. If the institution enters insolvency, your claim ranks alongside other general creditors, and you recover whatever the estate pays out, when it pays out.
This is not a scandal and it is not hidden in the contractual sense. It is stated in the account terms, usually in language that does not feel alarming. It is also the reason unallocated is cheap: you are, in effect, lending the institution gold and being compensated with the absence of a storage fee.
The market uses it because it is enormously efficient. Settling a wholesale trade in unallocated loco London metal requires a book entry and no forklift. That efficiency is genuinely valuable and it is what makes the global gold market liquid. The problem is not that unallocated exists. It is that many holders do not know they are in it.
The row that decides it for most people is the fourth one. Everything else is a cost or convenience trade. That row is a binary outcome in a rare event.
There is a regulatory development here that rarely reaches retail coverage and directly supports the distinction above.
Under the Basel III Net Stable Funding Ratio, which came into effect for banks in the UK and EU during 2021, gold is treated according to how it is held. Allocated gold held on behalf of clients, where the bank is a custodian and the metal is not on its balance sheet, is treated differently from unallocated positions, which attract a required stable funding factor that makes holding them structurally more expensive for the bank.
The practical effect, as the industry argued at length during consultation, was to increase the funding cost of running an unallocated book. That is a regulator looking at the same two arrangements and concluding they carry different risks, which is exactly the argument of this article, expressed in capital requirements rather than prose.
You do not need to follow the technical detail. The takeaway is that the allocated and unallocated distinction is not a marketing nicety. It is written into bank capital rules.
Physically backed ETFs hold allocated metal at trust level and publish bar lists, often daily. You own a share in the trust, not the bars, but the metal underneath is allocated and auditable. The relevant comparison there is cost, and we run it in Gold ETFs vs Tokenized Gold.
Bank gold accounts are usually unallocated by default, with allocated available at a higher cost and often a higher minimum. Read the account type on the statement rather than the product name.
Online bullion dealers with storage vary enormously. Some hold segregated allocated metal with published audits. Others operate pooled arrangements that are closer to unallocated than the marketing suggests. The word to look for is not "secure," which means nothing, but "allocated," "segregated," and "bar list."
Home storage is fully allocated by definition and transfers the risk from an institution to your own security arrangements, along with insurance problems most household policies do not solve. The full cost stack is in What It Really Costs to Own Physical Gold.
Tokenized gold inherits whatever arrangement sits underneath it. A token whose issuer holds allocated bars with published serial numbers and independent attestation passes this test. A token whose backing is described only in general terms does not, regardless of how the smart contract is written. The on-chain layer can be flawless and the custody layer still unallocated. The method for checking is in How to Verify Gold Token Reserves Yourself.
If a provider cannot answer four, five and six clearly, you have learned what you needed to learn.
It is tempting to finish an article like this with a flourish about the whole system being rotten. That would be wrong.
Unallocated metal is the mechanism that makes gold liquid enough to have a functioning global price at all. Without it, every wholesale trade would require physical settlement, spreads would widen dramatically, and the price discovery process described in How Is the Gold Price Set would be far cruder. The professional market uses it deliberately, with eyes open, and manages the counterparty exposure it creates.
The criticism that holds is narrower and sharper: retail holders are routinely placed in unallocated arrangements without understanding that they are creditors, and the documents that say so are not written to be noticed. That is a disclosure failure, not a conspiracy, and it is fixable by reading one line of a contract.
What is the difference between allocated and unallocated gold? Allocated gold is specific bars identified as your property and held in custody for you. Unallocated gold is a claim on an institution for a quantity of gold, with no specific bars set aside, which makes you an unsecured creditor.
Is unallocated gold safe? It carries a risk allocated gold does not: the failure of the institution holding the obligation. Whether that is acceptable depends on the institution and your holding period. It is a credit decision, and it should be made as one.
Why is unallocated gold cheaper? Because no metal is being stored specifically for you, so no storage or insurance is being consumed on your behalf. The absence of a fee is compensation for the credit exposure you are carrying.
Can I convert unallocated to allocated? Usually yes, for a fee, and often subject to a minimum because allocation happens in whole bars. Ask what the conversion costs and how long it takes before you need it.
Do gold ETFs hold allocated gold? The major physically backed trusts hold allocated metal at trust level and publish bar lists. Your share is in the trust rather than in specific bars, and the trust's own metal is allocated.
Is tokenized gold allocated? It depends entirely on the issuer's custody arrangement and disclosure. The token standard tells you nothing about this. Look for published bar lists, named custodians and independent attestations, then check them.
What is a bar list? A published record of every bar backing a holding, showing serial number, refiner, gross weight, fineness and fine weight. It is the document that makes allocated holdings verifiable rather than asserted.
Allocated and unallocated gold cost different amounts, and the difference in price is a difference in risk rather than a difference in service.
If you are trading in and out on a short horizon, unallocated is the market convention and the credit exposure is small in duration terms. If you hold gold because you want an asset that is nobody's liability, unallocated defeats the entire purpose of the trade, because it is precisely a liability, owed to you by a bank.
Read the account type. Ask for the bar list. The answer takes two minutes to find and it is the whole of what you own.
This article is for informational purposes only and is not financial advice.
| Allocated | Unallocated |
|---|
| What you own | Specific identified bars | A claim for a quantity of metal |
| Legal relationship | Bailment or custody | Debtor and creditor |
| On the institution's balance sheet | No | Yes, as a liability |
| If the institution fails | Your property, outside the estate | Unsecured claim in the queue |
| Bar list available | Yes | No, there is nothing to list |
| Typical cost | Storage and insurance charged annually | Usually no explicit storage charge |
| Minimum size | Often large, sometimes whole-bar | Small and flexible |
| Spread on buying and selling | Wider | Tighter |
| Who uses it | Central banks, ETFs, long-term holders, cautious institutions | The wholesale trading market, short-term positions |
