Who is buying unallocated silver? What are the risks?

Pirocco knows what I'm getting at.


ETFs are different than unallocated accounts. Clearly, unallocated accounts are different than allocated. Most of mine is in allocated, none in the other two.

In an allocated account, you - the account holder - buy metal and pay someone to look after it. It need not be a discrete lump, it can be a bit of a bar co-owned by other account holders.

In an unallocated account, you don't own the metal at all. You are a creditor to the company that does. So, you are lending them your cash and they promise to hold an equivalent amount of metal that has the value of what you've lent at the time you've lent it.

If you choose to sell or relinquish that amount of metal at a future date, you will - you hope - get the price equivalent in cash at that future date.

But you never owned the metal. You were exposed to its price movements but you never had the asset, merely a credit note against a company that did. So, if the company goes bankrupt, you may or may not get some of your money back. If a company holding your allocated metal goes bankrupt then, in theory at least, you should get that metal back as it is yours and so cannot be used to settle the company's outstanding creditors.



Edited for iPad-generated spelling mistakes. Of course, a bad workman blames his tools....
 
That is not how all unallocated works. Gold Stackers for example - the unallocated metal is not a company asset - there is a separate pool of metal that is managed on company accounts as client property that is explicitly excluded from stock on hand assets etc, so in the unlikely event of company administration, the metal in the unallocated pool is not a company asset to be disposed of - it is client metal in custody. I know of other dealers who manage their unallocated in a similar fashion. Customer metal vs dealer metal. Unallocated metal holders would have a very straightforward claim to an amount of metal equal to their holdings, and our hedging program runs throughout the day to ensure that new unallocated orders are matched with new physical metal purchases.

Trouble with the word unallocated is there about as many different definitions are there are offerings.
 
goldpelican said:
That is not how all unallocated works. Gold Stackers for example - the unallocated metal is not a company asset - there is a separate pool of metal that is managed on company accounts as client property that is explicitly excluded from stock on hand assets etc, so in the unlikely event of company administration, the metal in the unallocated pool is not a company asset to be disposed of - it is client metal in custody. I know of other dealers who manage their unallocated in a similar fashion. Customer metal vs dealer metal. Unallocated metal holders would have a very straightforward claim to an amount of metal equal to their holdings, and our hedging program runs throughout the day to ensure that new unallocated orders are matched with new physical metal purchases.

Trouble with the word unallocated is there about as many different definitions are there are offerings.
Click to expand...


Thats who I deal with and how it was explained to me.
 
goldpelican said:
That is not how all unallocated works. Gold Stackers for example - the unallocated metal is not a company asset - there is a separate pool of metal that is managed on company accounts as client property that is explicitly excluded from stock on hand assets etc, so in the unlikely event of company administration, the metal in the unallocated pool is not a company asset to be disposed of - it is client metal in custody. I know of other dealers who manage their unallocated in a similar fashion. Customer metal vs dealer metal. Unallocated metal holders would have a very straightforward claim to an amount of metal equal to their holdings, and our hedging program runs throughout the day to ensure that new unallocated orders are matched with new physical metal purchases.

Trouble with the word unallocated is there about as many different definitions are there are offerings.
Click to expand...


The rest of the world (eg., Goldcore, Goldmoney, BullionVault, and others) would call what you are describing an allocated account.
 
I would consider an allocated account "bar XYZ belongs to customer A" as opposed to pool metal.
 
But in an allocated account you can have both. So I might have a kilo bar of silver and another 50 ounces of another.

The kilo might be a registered bar in my name with a bar serial number, etc., but the extra 50 ounces might be part of another bar. Or 50 ounce rounds, whatever, but unspecified. It remains allocated, but perhaps unregistered.

However, the metal stays off the company's balance sheet and ownership is always in my name.

Allocated, in some places at least - interested to hear it might be different in Australia - is where you are buying into a pool of entirely unallocated metal. You have a claim against the company for the value of that metal, but it isn't yours. It is essentially a collateralised loan, but might have some other rights like being able to sell it on, etc.

This differs again from an ETF, as an ETF is a specific entity - a fund that trades on the market exchange and might be entirely, or only partially, or not at all backed by physical metal. (Some just use derivatives to try to match the price movements but hold little or no actual metal.)
 
I've seen implementations of allocated (as opposed to unallocated) in Australia range from "this specific bar will be stored for you" to "we'll store a bar of this type for you but you might get a different one in future" to "oh, um, there's a six week wait for delivery of your allocated gold".
 
Thanks. Before this thread, I didn't realise we might all be talking of different things!

Every day is a school day.

I also realise now why my question - who'd buy unallocated metal? - makes less sense to others than it did to me.
 
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