GLD provides all the benefits of physical gold ownership while remaining accessible in today’s global trading, liquidity, and global playing field environment. Unfortunately, shares don’t always match up perfectly to the gold that backed them.
Separate storage can incur costs and depository minimums may apply; which option best fits you will depend on your resources and the purpose for purchase.
What is Segregated Storage?
Under a fully segregated storage program, your precious metals are physically separated from those belonging to other investors at a vault or depository. Legal title remains with you; and no authority exists within the holding company or precious metals program to alter them without your express authorization as per their storage agreement.
However, this method can be costly as the storage provider must construct and staff its own vaults to offer such service. Furthermore, it creates additional security risks because it becomes harder to verify whether you have actually received physical receipt of coins or bars you initially stored with them.
An economical alternative is allocated storage, which ensures you will always receive exactly the same bullion when withdrawing them, though they may come from different fabricators than originally delivered to you.
What is the Benefit of Segregated Storage?
Segregated storage offers several advantages. First and foremost, it ensures your precious metals won’t become mixed in with those belonging to other investors and that access remains accessible irrespective of fluctuations in the market. Furthermore, legal title remains secure.
Storage options suitable for investors who seek precious metals as a hedge against economic slumps and longer-term declines are suitable for most Gold IRA investors, who don’t require taking physical possession of their precious metals and don’t possess either the inclination nor time for coin collecting.
Allocated storage is ideal for investors who desire legal but cheaper ownership of metals. I will detail the differences between allocated and depository storage in this episode of our podcast; listen in! You’ll learn which option will suit you best as well as any fees that apply with each type of storage option (and whether depository vs non-depository are considered separate categories).
What is the Disadvantage of Segregated Storage?
Segregated storage allows you to keep all the precious metals you own separated and locked up securely in an area in the vault that is specifically reserved for them, meaning when you withdraw your bullion it will look exactly the same as when originally deposited. However, this method comes at an added expense.
Some customers enjoy gambling on the value of particular bars and coins as an investment strategy or hobby, holding their various bars and coins separately in their vaults like coin collectors do.
Ideal segregated storage companies or depositories should possess an excellent track record and should operate completely independent from dealers with whom they conduct business, in order to prevent misappropriation of assets and investments belonging to traders and investors. Furthermore, any custodian who engages in this practice should be subject to regular and thorough external audits.
What is the Alternative to Segregated Storage?
Which storage option is appropriate for you depends entirely on your circumstances, including what kind of bullion you own and why you’re investing it in the first place. For collectors of rare coins with significant individual value, allocated storage may be your ideal solution as it ensures that when taking delivery or selling back gold and silver bars back to depository you receive exactly the same coins back that were initially delivered to you.
However, with fully segregated storage facilities your metal is kept separate from all of those stored with depository or precious metals programs, making this the preferred method used by investors worldwide. Furthermore, this approach also enables an investor to retrieve or sell back exactly the same bar/coins initially delivered – their legal title remains with them and cannot be altered or used by vaults.