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What Is Allocated vs. Unallocated Gold?

15 March 2018

Allocated Vs Unallocated Gold
If you are looking to invest in gold, then one of the things you will want to understand is the difference between allocated and unallocated gold.
Unallocated gold:
  • Is not necessarily backed by physical gold, and legal title to the gold typically sits with the bullion dealer you bought it through, rather than with you as the end investor.
  • Is generally low cost, and has no storage fees.
If you just want exposure to rising gold prices, then unallocated gold can be a great option. For those who want full legal title to the gold they’ve bought, which is understandable if you are worried about things like counterparty risk, then it typically makes more sense to buy allocated gold.
Allocated gold:
  • Means you will be the owner of specific physical gold bars or coins, though they may be stored with your bullion dealer.
  • Will typically have storage fees, which covers the bullion dealers cost for storage, insurance, ongoing reporting and the like.

Pool Allocated vs. Physical Gold Bars or Coins

Investors in pool allocated metal aren’t buying a specific bar or coin that they have distinct legal title too. Instead, they are effectively buying a ‘share’ in a pool of gold that is owned and managed by the entity that they buy it through, on behalf of all of the investors in the pool.
This method has a number of advantages, including the fact that it is typically the cheapest way to invest in gold, with lower margins than cast bars and especially minted products like gold coins. Pool allocated gold also has no ongoing storage fees, which eat away at the returns one generates from precious metals over time.
A final advantage of buying pool allocated metal is that it allows you to invest a specific dollar amount, rather than having to buy a specific weight.
Physical gold bars and coins are also great investments, and have their own advantages. The most obvious of those advantages is that an investor can buy their own specific physical gold bar, which they have full legal title too, which can either then be stored with a bullion dealer, in their own private vault through companies like Custodian Vaults, or at home if they wish.
Any investor that has ever held a physical gold bar in their hand will instinctively understand that there is ‘something’ about the tangibility of gold that is valuable, which is another plus for physical gold bars.
Like pool allocated bullion, physical gold bars can also be traded online 24/7 through reputable bullion dealers, making them very easy to buy and sell.

Which one is best?

There is no correct answer to the question of whether or not allocated gold is better than unallocated gold, or vice-versa. Both are great products.
For those who value the tangibility and security of owning their own physical gold bars, then allocated metal will be a more suitable solution.
Unallocated gold is obviously cheaper to trade, though it does not give you legal title to specific gold bars.
Regardless of which choice you make, the key thing for an investor is to make sure you are buying your gold through a reputable bullion dealer with a long history. Ideally the bullion dealer will have a direct relationship with a LBMA accredited refinery too, which will provide regarding the purity of the gold you are buying, as well as a bullion vault, so that you have a secure storage option for your precious assets.

This publication is for educational purposes only and should not be considered either general or personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, and past performance is not necessarily indicative of future performance. Any prices, quotes, or statistics included have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.