Storage Showdown: Pooled vs Segregated Vaulting for Your Gold

When storing bullion with a custodian, investors typically choose between pooled (unallocated) storage and segregated (allocated) accounts. Each model has distinct legal, operational, and cost implications. This article examines both options across five key dimensions—legal ownership, security, cost, liquidity and auditability—to help you make an informed custody decision.

Definitions

Pooled (Unallocated) Storage: The custodian holds bullion in bulk on behalf of multiple clients. Clients have a contractual claim to a quantity or value of gold but not specific bars or coins.

Segregated (Allocated) Storage: Specific bars or coins are assigned to the client and stored separately, often with individual serial numbers and custody records.

Legal Ownership and Risk

With segregated storage, you typically retain title to the exact items in your account. In pooled storage, you have a creditor claim against the custodian rather than ownership of particular bars. In the event of custodian insolvency, segregated holdings are usually recoverable as they remain identifiable; pooled holdings could be subject to claims by other creditors and legal complexity.

Security and Insurance

Both models can offer high physical security, but insurance arrangements differ. Segregated accounts commonly have tailored insurance for specific inventory. Pooled storage insurance often covers aggregate holdings and may be cheaper to administer. Evaluate policy limits, deductibles, and clarity around losses in each model.

Cost Considerations

Pooled storage is generally less expensive due to economies of scale. Segregated storage commands higher fees because of individualized management, auditing, and packaging. For small holdings, pooled options can be cost-effective, while larger investors may find the premium for segregation worthwhile for legal and control reasons.

Liquidity and Operational Convenience

Pooled accounts often enable quicker liquidity and easier settlement since the custodian manages internal inventory without assigning specific bars for each transaction. Segregated accounts may require more lead time for deliveries or audits, but they provide clarity for estate planning and provenance—important considerations for high-value collectors.

Auditability and Transparency

Segregated storage enhances audit trails: serial numbers, photographs, and individual certificates can be provided. Pooled storage requires robust reconciliation processes and independent audits to ensure aggregate holdings match client claims. When custodians provide frequent third-party audits and transparent reporting, pooled solutions can be sufficiently trustworthy for many clients.

Use Cases

• Pooled storage is suitable for: Investors prioritizing low fees and easy liquidity, smaller retail allocations, and short to medium-term holdings.
• Segregated storage is suitable for: High-net-worth investors, collectors needing provenance, estate planning, and those prioritizing legal title and recoverability.

Legal and Jurisdictional Nuances

Jurisdiction matters. Some countries impose different legal outcomes in insolvency or have stronger title protections for segregated holdings. Research the custodian's legal domicile, applicable law, and client protection frameworks before deciding.

Best Practices When Choosing a Custodian

1. Verify audit frequency and the independence of auditors.
2. Ask for detailed insurance policy language and coverage amounts.
3. Understand the custodian's insolvency history and parent company strength.
4. Request documentation on chain of custody and provenance controls.

Conclusion

The choice between pooled and segregated storage is not purely financial—it's a trade-off between cost, legal clarity and control. Small investors often prefer pooled vaulting for the convenience and lower fees. Larger or risk-averse investors typically favor segregated custody despite higher fees. Align your choice with your allocation size, liquidity needs, and tolerance for counterparty risk.

"Custody is an investment decision in its own right—treat storage choices with the same rigor as the assets they protect."