Allocated Gold
Allocated gold is gold held in custody as specific, identified bars that belong to the account holder. The custodian holds the bars for the owner, so the owner has title to the metal itself rather than a claim on the custodian.
Also called: allocated account · allocated bullion · earmarked gold · segregated gold
An allocated account lists each bar the holder owns, normally by refiner, serial number, gross weight, fineness and fine weight. Under the rules of London Precious Metals Clearing Limited, the clearing member holds those specific bars as bailee in the name of the account holder. The custodian may not lend or use them, and the metal is not a credit exposure to the custodian in the way an unallocated balance is.
The Bank of England's vaults are the best-known example. The Bank looks after about 400,000 bars, worth more than £200 billion, for the UK government, other central banks and commercial banks, and keeps a record of every bar and its owner. When one customer sells gold to another, the bars usually stay where they are and the ownership record changes. Most of these are London Good Delivery bars, the standard unit of the wholesale market.
The alternative is an unallocated account: a balance denominated in ounces, like a current account in metal, which gives the holder a contractual claim on the bank rather than on particular bars. It is cheaper to hold, easy to trade in any quantity and the form in which most London trades settle, but the holder is an unsecured creditor. The distinction is the same one a payments firm meets between a segregated account and a bank's general balance sheet, or between crypto custody that keeps client assets apart and an exchange that pools them.
In practice
Allocation removes custodian credit risk, not price risk or legal risk. Bars in a foreign vault sit under that country's law, courts and sanctions regime, and moving them home is slow and costly.
Example
A fund buys ten Good Delivery bars in allocated form. Its statement lists ten serial numbers totalling roughly 4,000 fine troy ounces. Had it bought 4,000 ounces unallocated, the statement would show a single balance, and in the bank's insolvency it would rank as a creditor for that balance.
Learn more on Money Wiki
This page gives the short answer. Money Wiki has a longer guide to Allocated Gold, with more detail and background.
Commonly confused with
| Term | How it differs |
|---|---|
| Unallocated gold | Unallocated gold is a claim on a bullion bank for a quantity of metal, with no bars set aside for the holder. Allocated gold is ownership of identified bars, held by the custodian as bailee. |
See also
- London Good DeliveryLondon Good Delivery is the LBMA standard for the large gold and silver bars traded in the London wholesale market. A gold Good Delivery bar holds between 350 and 430 fine troy ounces at a minimum fineness of 995.0 parts per thousand.
- Monetary GoldMonetary gold is gold that a country's monetary authority owns and holds as a reserve asset. In IMF statistics it covers gold bullion, including allocated gold accounts, and unallocated gold accounts with non-residents that give a claim to delivery of gold.
- Gold SwapA gold swap is a transaction in which one party exchanges gold for currency, usually US dollars, and commits to reverse the exchange at an agreed price on a future date. Economically it is a short-term loan secured on gold.
- Segregated AccountA segregated account holds customer money apart from the firm’s own money, so the two are never mixed and the customer balance is identifiable as customer balance in both the firm’s and the bank’s records.
- Crypto CustodyCrypto custody is holding someone else’s crypto-assets, or the means of access to them, in a way that lets you move them. The test is control in fact — who could move the balance without the customer’s cooperation — not how the service describes itself in its terms.