In precious metals storage, segregated vs. allocated storage comes down to this: segregated storage keeps your exact bars and coins in a dedicated space that only holds your property, while allocated storage records a specific quantity of metal in your name but holds it alongside identical products belonging to other clients. Both leave you as the owner of physical metal rather than a creditor of the depository. Segregated costs more and gives you back the same items you deposited; allocated costs less and gives you back equivalent items of the same weight and purity.
What Allocated Storage Means
With allocated storage, the depository records the type and quantity of metal you own and stores those items in shared vault space with identical products from other clients. Ten one-ounce gold bars go into a section holding hundreds of other one-ounce gold bars. You are owed back the same weight and purity, not the specific bars you deposited. Deposit a Valcambi bar and you might withdraw a PAMP Suisse bar of equal weight.
The arrangement works like a bank account for metal. The facility tracks your balance rather than your individual items, which keeps vault operations efficient and makes sales and transfers faster.
One terminology trap is worth flagging before you compare providers. The London Bullion Market Association defines “allocated” accounts as those backed by specific, individually identified bars listed on a weight list by serial number.1LBMA. Precious Metal Accounts Many U.S. retail depositories use the same word loosely, applying “allocated” to accounts where metal is tracked only by type and quantity in commingled space. When you read a depository’s storage agreement, confirm whether “allocated” means your specific bars are identified on a weight list or simply that a quantity is credited to your name.
What Segregated Storage Means
Segregated storage physically isolates your metals from everyone else’s. The depository places your items in a branded box, locked cage, or dedicated locker inside the vault. Each piece stays there until you ask for it back. Deposit a 100-ounce silver bar with serial number X, and that exact bar is what the facility hands you at withdrawal.
The method suits collectors and investors holding premium items. Specific mint years, limited editions, and graded rare coins carry value above the melt price, and commingling them with standard bullion would wipe out that premium. Segregated storage ensures no mixing occurs during audits or routine vault reorganization.
Each locker or cage is independently labeled and tracked in the vault’s management software, and staff verify individual serial numbers during audits. That granular tracking adds logistical overhead and cost, but it produces a level of certainty that allocated accounts cannot match.
What Each Storage Method Costs
Depositories price storage based on the space and labor each method consumes. Fees are typically quoted as a percentage of the stored metal’s market value, expressed in basis points. One basis point equals one one-hundredth of a percent.
Allocated storage is generally cheaper because shared vault space is efficient. Annual fees at many facilities fall between 35 and 75 basis points. On $100,000 of gold, that’s roughly $350 to $750 a year. Segregated storage costs more because dedicated space cannot be used for anyone else, and bar-level tracking during audits takes more labor. Annual fees commonly run 100 to 150 basis points, or a flat rate scaled to volume.
Most depositories also set a minimum annual fee regardless of market value. Minimums protect the facility from servicing small accounts at a loss, and you pay whichever is higher, the minimum or the percentage. For allocated accounts, minimums in the $100 to $200 range are common, with segregated minimums running higher.
Legal Protection If the Depository Fails
The practical reason the choice matters beyond price shows up if a depository ever becomes insolvent. The question is whether your metal is part of the bankruptcy estate or sits outside it, beyond the reach of the depository’s creditors.
Depository storage is generally structured as a bailment: you entrust property to a custodian without transferring ownership, and your assets should not appear on the depository’s balance sheet. Under federal bankruptcy law, property in which the debtor holds only legal title but not equitable interest does not become part of the estate.2Office of the Law Revision Counsel. 11 USC 541 – Property of the Estate
The allocated-versus-segregated distinction has real teeth here. Courts have held that the test of a true bailment is whether the identical thing is to be returned; if you are owed back a different item of equal value instead, the arrangement may be treated as a sale rather than a bailment.3United States Bankruptcy Court for the Southern District of New York. In Re: Precious Metals Bankruptcy Opinion Segregated storage clearly qualifies as bailment because the exact items go in and come out. Allocated storage, where the depository may return equivalent bars, sits in a grayer area that a bankruptcy court could scrutinize more closely.
Investors with segregated accounts therefore have the strongest footing if a facility fails. The metal is identifiable, physically separated, and documented by serial number, leaving little room for a trustee to argue it belongs to the estate. Allocated accounts still have a strong argument, especially where the depository keeps clear records of each client’s holdings, but the fungible nature of the metal introduces a wrinkle segregated storage avoids.
The Uniform Commercial Code reinforces these protections. Under UCC Article 7, a warehouse operator acting as bailee must deliver goods to the person entitled under a document of title, subject to limited exceptions like unpaid liens or lawful enforcement.4Legal Information Institute. Uniform Commercial Code 7-403 – Obligation of Warehouse or Carrier to Deliver; Excuse Your storage agreement and holding reports serve as the documentation establishing your right to delivery.
Unallocated Storage Is Not a Third Flavor of the Same Thing
Many depositories and banks also offer “unallocated” storage, and it is easy to lump it in with allocated. Do not. In an unallocated account, the depository sets aside no specific metal for you. You hold a claim against the institution for a quantity of gold or silver, but the metal may not physically exist in a vault earmarked for customers. You are a creditor, not an owner.
If the bank or dealer becomes insolvent, your claim ranks alongside other unsecured creditors, and you may recover only a fraction of the value. Unallocated storage typically costs nothing, which is its appeal, but it carries counterparty risk that neither allocated nor segregated storage does. If you bought physical metal to hedge against exactly that kind of institutional failure, the cheapest storage option undoes the hedge.
Which One You Should Choose
The right method depends on what you hold and why. Allocated storage is a sensible fit for standard bullion where one bar is functionally identical to another. If your holdings are common one-ounce gold bars or standard silver rounds and your priority is secure storage at the lowest reasonable cost, allocated accounts deliver that.
Segregated storage earns its premium in a few specific cases:
- Premium or collectible items. Rare coins, limited-edition mint products, and bars carrying numismatic value above melt price need physical isolation so the premium survives.
- Maximum bankruptcy protection. If you want the strongest legal position should the depository fail, having your exact items physically separated and documented by serial number removes any ambiguity about ownership.
- Tax lot identification. Investors who want to pick specific purchase lots when selling benefit from knowing exactly which items sit in their account at all times. With allocated storage, where you receive equivalent bars rather than your originals, you may have to fall back on average cost or first-in-first-out accounting.
- Peace of mind. Some owners simply want to know the metal they bought is sitting untouched in its own space. Segregated storage is the only method that provides that.
Whichever you pick, the more consequential decision is steering clear of unallocated storage if counterparty protection is part of why you bought metal in the first place. The gap between allocated and segregated is meaningful but manageable. The gap between either of those and unallocated is the difference between owning metal and owning a promise to deliver it.