An increasing number of investors are turning to gold, silver, and other precious metals when considering what types of investments to engage in. People who see precious metals as a smart investment often worry and stress about the nearly constant ups and downs of the stock market. They may be concerned about rampant inflation and different geopolitical concerns that may destabilize the future of paper currency.
In many ways, precious metals are a safer bet and a reasonable way to protect wealth. However, gold and silver are tangible objects that must be safely and securely stored. There are a number of places that store gold and silver in various ways. Continue reading to learn more about allocated and segregated storage—two popular storage methods when it comes to private precious metal depositories.
How to Store Gold and Silver
While gold and silver are attractive investment options, they must be stored differently than traditional sources of wealth. Stocks and bonds are currently traded in digital form over thousands of miles through the internet. They’re protected from theft by extraordinarily sophisticated computer systems. Shares aren’t personally stored by an individual and don’t have any intrinsic value in themselves.
Gold and silver are fundamentally different than those other asset classes because they’re physical items that take up space. For instance, a large collection of silver coins and bars can take up a considerable amount of space in a home or business. They can be heavy and awkward to move around.
Gold and silver vaults are built for individuals who don’t want to have to worry about how to store their gold and silver on a daily basis. These bullion vaults contain the precious metals that belong to a large number of individuals—all protected and insured by the company or depository. These companies charge a nominal fee for maintenance and security of the precious metals.
The fee that the depository charges depends on whether or not you choose to have your precious metals stored in an allocated or segregated vault. Knowing the difference between these types of allocation is the first step for any prospective precious metals investor.
What is Segregated Storage?
Segregated storage is an approach to precious metal bullion storage that involves buying precious metals and having them stored in a vault apart from the metals that belong to other individuals. An individual may specifically have their own shelf or their own designated area where they can access their precious metals at any time.
This approach to gold and silver storage is more expensive than allocated storage. The main difference is that it allows an individual to invest in particular types of precious metals. Along with simply buying the precious metal, some precious metals investors want to speculate on the values of different coins and bars. They want to hold specific pieces of precious metals that they believe will increase in value over time faster than the value of metals themselves.
This practice is an offshoot of coin collecting and can be a hobby as well as an investment strategy. These individuals would want their precious metals segregated in their associated vaults.
What is Allocated Storage?
Allocated storage, on the other hand, is an alternative approach where an individual mixes their precious metals with the holdings of other investors in a vault. With allocated storage, there’s no area or space dedicated to a particular individual. The main benefit to allocated bullion storage is that the cost is lower than segregated storage.
This approach is helpful for individuals who view investing in precious metals simply as a hedge against economic downturn. Some investors are primarily focused on diversification. They want to buy investments in all possible areas of the economy so that they can make as much money as possible during economic downturns. In this way, gold and silver play the same role as international investments or real estate to an investor mostly focused on stocks or bonds.
These investors may not have the time or the energy for coin collecting. They don’t want to have to worry about the fluctuating prices for Krugerrands or other types of gold or silver coins. For those investors, all precious metals bars are the same. It wouldn’t make sense for those individuals to spend a considerable amount of money in fees for a distinction that they don’t want in the first place.
Which Storage Option is Best?
Anybody interested in investing in precious metals should consider their options and their goals for investing. They should look at the different types of precious metals choices and various bullion storage facilities. Bullion investors interned in depository storage need to decide whether allocated or segregated storage will be best for their unique needs.