What Allocated Means
In an allocated account, the custodian sets aside specific, serialized bars for you and reports the bar list. The metal is your property, held in custody — it does not appear on the provider's balance sheet and is not available to its creditors if the firm goes under. Think of it as a coat-check ticket for identified property rather than a loan to the coat-check operator.
You pay for this protection through storage fees and sometimes separate insurance charges, and meaningful minimum account sizes are common. Segregated storage — where your bars sit apart from everyone else's — costs more than pooled allocated storage, but both give you title to specific metal. Ask for the bar list and read the custody agreement; a reputable provider will not flinch at either request.
What Unallocated Means
In an unallocated account, you hold a claim denominated in ounces against the provider, not title to particular bars. It works like a bank deposit: the provider can use the metal in its business — lending it, leasing it, hedging with it — and you are an unsecured creditor. Fees are lower or zero, minimums are small, and buying and selling is convenient, which is why trading-oriented accounts are usually unallocated.
The risk only shows up at the worst moment. In a failure or insolvency, you stand in line with other creditors and may recover only part of your metal's value, after a long wait. History offers real examples of bullion firms failing and unallocated holders taking losses they never imagined when they opened the account.
How Futures Compare
Futures are a different animal entirely: a leveraged price instrument, not a way to store metal. But they share one feature with allocated storage — a clear legal structure. US futures positions and customer funds are segregated at the clearing level, and pricing is transparent and exchange-regulated. Some investors hold allocated metal as a core position and use futures for short-term trades around it.
Whichever route you take, understand what you legally own before you wire money. If trading futures is part of your plan, remember that futures trading involves substantial risk of loss and is not suitable for all investors.