Metal held through a provider comes in two legal forms that look almost identical on a statement. What separates them is what the holder owns if the provider stops trading.
Allocated means identified property
An allocated holding consists of specific bars, recorded by serial number, weight and fineness, registered as belonging to the client.
The provider holds them as custodian, and the metal is not part of the provider's own assets, so it should not be available to the provider's creditors.
The client can generally inspect the list of bars, and in many arrangements can visit the vault or commission an independent audit of them.
Unallocated means a claim in ounces
An unallocated holding is a balance denominated in metal, owed by the provider to the client, without any particular bars attached to it.
The provider is expected to hold metal against the total of such balances, but the client's position is that of a creditor rather than an owner.
If the provider fails, the claim ranks with other unsecured claims and is settled from whatever the estate can produce.
The cost difference is the reason both exist
Allocated storage carries an explicit fee, because identified bars occupy dedicated space and require individual record keeping and periodic verification.
Unallocated accounts are usually cheaper or free to hold, since the provider can operate on pooled inventory and use the arrangement as a source of funding.
That cost gap is the price of the legal protection, and it is charged openly rather than hidden, which makes the comparison straightforward.
Wholesale markets run largely unallocated
Most large scale trading between institutions settles in unallocated form, because transferring a balance is far faster than moving identified bars between accounts.
Participants convert to allocated form when they want the metal itself rather than exposure to its price, and pay a fee to do so.
The system works because the participants are professional counterparties who assess each other's credit continuously.
Retail products sit across the range
Consumer platforms describe their arrangements in varying detail, and terms such as backed, secured or vaulted do not by themselves indicate which form applies.
The reliable indicators are whether bars are identified to the client, whether the metal is held by a separate custodian, and whether the client's holding is stated to be outside the provider's estate.
Those three points appear in the terms and conditions, and they answer the question that marketing language is generally arranged to avoid.