Allocated vs Unallocated Gold Investment

Allocated and unallocated gold are the main forms of gold ownership, both of which have their own benefits. Many investors will ask themselves the question, “what are the variations between allocated and unallocated gold?” before they commit to these popular types of bullion investment.

What is an Allocated Gold Investment?

Allocated gold is tangible and constitutes direct ownership for the investor, whereas unallocated gold is where investors hold a claim on a pool of gold that is held in an account by a financial institution; the physical asset isn’t actually allocated to the investor.

This is how they vary on the surface, but let’s delve deeper into some of the key differences between allocated gold and unallocated gold so that you, as an investor, can approach your investment with full knowledge.

Allocated Gold: Key Features

When you invest in allocated gold, you have legal ownership of these specific gold coins or bars and it is held in your name. This is entirely separate from the assets of the financial institution. The gold you purchase can either be delivered to your home or business address, or it can be stored securely for you if preferred.

The direct and physical ownership of allocated gold makes it unique to other types of gold investment, whereby you might only have a signed document to claim the precious metal. With allocated gold, you hold the direct title of the assets and it is yours by name and nature.

Unallocated Gold: Key Features

Unallocated gold provides a unique approach, whereby the gold is held onto by the given financial institution. The gold is in an account and won’t be physically delivered or held on your behalf. This means that the gold isn’t legally allocated to the buyer, but instead, they hold a claim on a specific quantity of gold. 

Usually, unallocated gold is held in a vault and the investor is much like a creditor of the bank. The main characteristic of unallocated gold is the lack of direct ownership of the physical gold bars or coins. Although this option offers a degree of flexibility for the investor, there are also significant risks involved with unallocated gold, which will now be explored in more detail. 

Comparing Allocated vs Unallocated Gold

These two investment structures have a small variation in terms of ownership, however the pros and cons vary vastly for the investor. Here is a visual overview of each type of gold ownership and how it may impact the buyer:

Allocated Gold	Unallocated Gold
Allocated gold is the only real way of owning physical bullion, whereas unallocated gold mimics bullion investment.	Unallocated gold is considered to be the most popular form of gold investment across the globe.
Allocated gold is the investors physical property and has no association with the financial institution, and cannot be taken over in the event of a financial crisis.	Unallocated gold is still owned by the bank and therefore yields lower premiums.
There are higher costs associated with allocated gold due to storage expenses and premiums.	Unallocated gold is a cheaper and more practical method of gold investment as there is no physical bullion to keep hold of.
When you invest in allocated gold, you are the legal owner of a tangible quantity of bullion.	An investor of unallocated gold doesn’t physically own the bullion and it persists as property of the bank.
Allocated gold requires a safe vault at home or secure vault, but it is usually very simple to store with discretion.	Any amount of gold cannot be redeemed as the investor isn’t the legal owner, even though it’s supported by the bank’s gold reserves.
Once you make an investment of allocated gold, this remains yours and will not vanish. You can leave it aside for a period of time and nothing will happen as long as it’s securely stored.	Your investment and money is backed up by the physical gold reserves of the bank.

Considerations as an Investor

When you’re in the position to invest in allocated or unallocated gold, there are a handful of considerations every investor needs to make. The following ideas should be kept in mind at all times when it comes to asset allocation:

Risk Tolerance

Allocated gold is definitely the investment option which poses fewer risks to the buyer, since direct ownership is involved and counterparty risk is reduced.

Desire for Physical Ownership

If it’s important to the investor to have physical ownership of the gold, then allocated gold is the most appropriate choice. If physical ownership is not a high priority, then unallocated gold may be a consideration to make.

Cost Sensitivity

Allocated gold comes at a higher expense than unallocated gold due to premiums and storage costs, however it does offer higher degrees of financial security.

Need for Liquidity

Allocated gold is by far the most liquid investment method as it is a physical asset that can be easily sold or traded. If you’re looking for high liquidity, allocated gold is the most viable option.

Trust in Financial Institutions

Your investment is tied to the financial health of the bank, so are you able to trust that your pool of gold won’t be exposed to counterparty risk? The financial stability of the bank should always be a key consideration.

Final Thoughts

So, whether you’re just experimenting or you’re a seasoned investor, it’s vital to understand these key differentiations between allocated gold vs unallocated gold Australia. Selecting the most effective investment method for you will bring about the best results and provide you with the security, flexibility and structure you’re looking for from physical gold ownership. Allocated gold investment will always be a more secure and lucrative investment for bullion. It’s a safe investment which offers physical ownership with no exposure to counterparty risks. Take the next step and make your investment of allocated gold now and reap the benefits of this secure, liquid and cost effective investment.