Before putting gold into storage, check the rights you acquire, how holdings are recorded, who arranges insurance and how to withdraw the metal. Service labels and audits alone do not replace a contract, policy terms or evidence of holdings.
What Exactly Do You Own?
Start by checking which right the documents establish: ownership of metal or a claim against a provider for a specified amount of gold. This matters both when buying gold with storage and when placing metal you already own into custody. The service description may use the terms "allocated" and "unallocated."
Unallocated account. In the LBMA's description of the wholesale over-the-counter market, this is a contractual claim against the account provider, not a right to a specific bar. The client bears the credit risk of this organization. The OTC Guide, LBMA. The account name alone does not establish the priority of claims in bankruptcy; this must be assessed based on the contract and applicable law.
Allocated account. This is backed by specific, identified metal. For bars, the LBMA describes a weight list with unique numbers, gross weight, fineness, and fine gold weight. This allows for the identification of the exact bars held for the client. The OTC Guide, LBMA.
For products where gold is stored on clients' behalf, the World Gold Council (WGC) recommends giving investors full legal title and making clear when that title passes. Gold may be allocated to individual investors, or several investors may co-own an allocated quantity of metal—a pool-allocated holding. This is not necessarily a single large bar. WGC, section 10.1. These recommendations are voluntary and do not in themselves confirm the terms of a specific provider.
Metal Identification and Storage Conditions
Allocating specific metal does not mean it is stored in a personal safe. Do not confuse three separate questions: who owns the gold, how it is identified, and where it is physically located.
If a provider uses the word "segregated," ask for the agreement to specify what is separated, whose assets it is separated from, and how that separation is verified. A separate accounting entry alone does not prove physical segregation.
Request a sample statement of holdings. For individually allocated metal, it should allow you to identify your specific holdings; for pool-allocated, it should show the total allocated pool and your share in it. If this connection is unclear, ask for clarification before making a payment, as a product's marketing name is no substitute.
Insurance: Responsibility, Coverage and Limits
The marketing phrase "the metal is insured" is not enough to assess coverage. In a joint advisory for U.S. investors, the CFTC and FINRA warn about issues including fees for storing and insuring non-existent metal. CFTC/FINRA advisory, question 8.
Key questions for the contract and insurance policy:
- Who arranges the insurance, and whose interests are covered? Is it the responsibility of the provider, the vault operator, or the owner? For allocated accounts as described in the LBMA guide, the owner arranges insurance unless explicitly agreed otherwise. The OTC Guide, LBMA.
- What does the policy cover? What risks are insured against: theft, physical damage, fire? What are the exclusions?
- Is transportation covered? This is important if you plan to withdraw or move your gold.
- What is the coverage limit and in what currency? Does it apply to the entire vault or to your specific assets? How is the metal valued for an insurance claim?
Request evidence of insurance coverage and review the relevant policy terms before transferring any funds.
Confirming Holdings: Audits and Other Checks
An independent audit is one way to verify holdings. Ask for the date of the latest audit, the auditor's name, and the report. A mere mention of an audit on a website does not show what was actually checked.
The WGC recommends regular independent audits that verify holdings and reconcile them with records, with results published or made available to investors. WGC, section 10.2.
Separately, the WGC suggests considering a physical inspection of holdings or a sample, including weighing, assaying, and checking inventory lists. You should not assume that any audit already includes these procedures for every item. WGC, section 10.2. Therefore, you should clarify:
- Who conducts the audit?
- How often?
- What is the scope of the audit (reconciliation of documents, physical inspection, weighing)?
- Can I review the latest report?
Full Cost Structure and Withdrawal Conditions
Before entering into an agreement, you must understand the full cost structure. Ask about all possible fees that may arise during the ownership, transfer, or sale of the gold Investor Guidance, World Gold Council.
The fee schedule may include the following items—clarify which ones apply and which are already included in the overall fee:
- Storage fee: calculation basis and payment period.
- Insurance cost.
- Administrative fees.
- Transaction processing fees (buying, selling).
- Costs for physical withdrawal and delivery.
Pay special attention to the withdrawal and transfer of gold. Get documented clarification on the request procedure, timelines, pickup locations, and all associated costs.
Final Checklist for Reviewing the Agreement
Use this checklist to evaluate any gold storage provider's offer. The answers should be found in the documents, not in a manager's verbal assurances.
- Contracting Party: Who are you entering into an agreement with? What is the company's jurisdiction?
- Nature of Your Right: Do you have a claim against the organization, individual ownership of the metal, or a share in an allocated pool? When does this right come into effect?
- Identification: If the metal is allocated, how is it identified (serial numbers, weight, fineness)?
- Storage: Where is the gold physically located? If segregated storage is promised, what exactly is segregated and how is this verified?
- Insurance: Is there a valid policy? Who is the beneficiary, what is covered, and what are the limits and exclusions?
- Audits: Who audits the vault holdings, how often, and how thoroughly? Are the reports available?
- Withdrawal and Costs: What are the full terms and costs for storage, administration, and physical withdrawal of the metal?
Compare the cost of storage alongside the strength of the supporting evidence. Before transferring money or metal, you should clarify any discrepancies between the advertising, the contract, the insurance policy, and the statements of holdings.
This article does not constitute individual investment, legal, or tax advice. Consult an independent professional before making financial decisions.