Third-party vault storage of your precious metals is an attractive way to store gold, silver and other assets. But allowing a third-party to store and secure your precious metals is no small thing. You should never just jump in. You need to know what services you are receiving because not all precious metal vault storage will be the same. You will be entrusting another entity to manage, track and keep your valuables safe. And there are three main types of service that a bullion vault will typically offer: unallocated, allocated and full segregated. It’s important you understand the differences and what type of service you are entering into. The video below explains what each is and the differences and pros and cons of each.
What is unallocated, allocated and segregated storage?
It’s important to understand the difference between each of these types of bullion storage. Watch the video above for a better understanding. But, the following provides a brief summary.
Unallocated vault storage
Unallocated storage is a method in which investors buy a portion of the overall precious metal holdings of the vault, without actually owning a specific bar or coin. Instead, they hold an unsecured claim against the vault’s inventory. This means that the investor has no legal entitlement to any specific physical bars or coins and relies on the trustworthiness of the vault operator to maintain sufficient inventory to honor the claim. Unallocated storage is generally cheaper than allocated or segregated storage, but it carries higher counterparty risk.
Allocated vault storage
Allocated storage, on the other hand, is a method in which investors purchase and own specific physical bars or coins in the vault. These precious metals are allocated to a specific investor and stored separately from the vault’s general inventory. The investor owns the specific bars or coins and can demand delivery or sell them at any time. Allocated storage carries lower counterparty risk than unallocated storage since the investor owns specific physical metals.
Segregated vault storage
Segregated storage is similar to allocated storage in that investors own their specific physical bars or coins in the vault. However, in segregated storage, the investor’s precious metals are stored in a separate location or compartment within the vault. This ensures that the investor’s precious metals are not commingled with the vault’s general inventory or with other investors’ holdings. Segregated storage is generally the most expensive option, but it offers the highest level of security and peace of mind.
The Final Score
Make sure you do your own research before committing to a vault storage service. You can find out more about how vault services operate, what to expect and recommendations here. But the final score is that once you find a dependable affordable option, bullion storage services are an excellent way to spread your risk and secure your precious metal assets, especially as you grow your collection in value. But there are some excellent services, like BullionStar that have low price of entry, offer segregated storage or unallocated, if you wish, and provide offshore options too.