When storing precious metals, the distinction between allocated and unallocated storage is perhaps the most critical decision an investor will make. The difference can mean the security of your assets versus exposure to significant counterparty risk.
What is Allocated Storage?
Allocated storage means your specific bars or coins are physically set aside in your name. You own specific, identifiable pieces of metal with unique serial numbers or characteristics.
Key characteristics of allocated storage:
- Direct ownership: You own specific, identified bars or coins
- Segregation: Your metals are physically separated from others
- No counterparty risk: If the storage provider fails, your metal is yours
- Audit trail: Each item has serial numbers and certificates
- Higher costs: Requires more space and administration
What is Unallocated Storage?
Unallocated storage means you have a claim on a pool of metal held by the provider. You don't own specific bars—you have a credit balance that entitles you to a quantity of metal.
This arrangement is similar to a bank deposit: you don't own specific banknotes, but rather a claim on the bank's funds.
Characteristics of unallocated storage:
- Pool claim: You own a share of a common pool
- Lower costs: More efficient for the provider
- Counterparty risk: If provider fails, you're an unsecured creditor
- Fungibility: Metal can be leased or used by the provider
The Counterparty Risk Reality
The most significant difference is what happens if the storage provider experiences financial difficulties:
Allocated: Your metal is legally yours. It's not part of the provider's assets and cannot be claimed by their creditors. You can demand physical delivery or transfer to another facility.
Unallocated: Your claim is an unsecured debt. In bankruptcy, you queue with other creditors. History shows unsecured creditors often recover only a fraction of their claims.
This distinction became painfully clear during the 2008 financial crisis when several precious metals schemes collapsed, leaving unallocated holders with significant losses.
Questions to Ask Your Provider
Before selecting a storage arrangement, ask:
- Is my metal held in my name with specific serial numbers recorded?
- Is it physically segregated from other clients' metals?
- Can the provider lease, lend, or otherwise use my metal?
- What happens to my metal if the provider becomes insolvent?
- Can I request physical delivery or inspection?
- Is the metal fully insured, and who is the beneficiary?
When Unallocated Might Be Appropriate
Unallocated storage isn't inherently wrong—it has legitimate uses:
- Short-term trading positions where counterparty risk is limited
- Very small holdings where allocated fees are disproportionate
- Clients of major bullion banks with strong balance sheets
However, for meaningful wealth preservation holdings, allocated storage is strongly recommended.
The Marcellus Approach
At Marcellus, all client holdings are fully allocated and segregated. We believe this is non-negotiable for serious wealth preservation:
- Individual ownership: Each bar and coin is recorded to your account
- Physical segregation: Your metals are stored separately in identified locations
- Full insurance: Lloyd's of London coverage with you as beneficiary
- Regular audits: Independent verification of all holdings
- Delivery option: Take physical delivery at any time
Our secure vaulting facilities in Zürich, Singapore, London, and Cambodia all operate on this basis.
Making the Right Choice
For precious metals held as a long-term store of value, allocated storage is essential. The additional cost—typically 0.3-0.5% annually—is a small price for the security of knowing your wealth is truly yours.
Speak with a Marcellus advisor to discuss storage options tailored to your circumstances.