If your dealer fails: what happens to your metal

Allocated storage creates a bailment. Identified, serial-numbered bars belong to you; the operator holds them as custodian. In an insolvency they are not assets of the estate, and an administrator's job is to return them, not distribute them.

Unallocated metal is a debt. You hold a claim against the company for a quantity of gold, ranking alongside other unsecured creditors. Recovery depends on the balance sheet, and historically unsecured recoveries in commodity broker failures have been partial and slow.

• Allocated: your bars, bankruptcy-remote, returned in specie
• Pooled/segregated in aggregate: usually protected, but read the ratio and audit terms
• Unallocated: unsecured claim on the company — a credit decision, not a metals decision

Deposit guarantees and investor compensation schemes cover cash deposits and regulated investment business. Physical bullion dealing is generally outside both: the FSCS in the UK, EU deposit guarantee schemes and equivalents elsewhere do not make a bullion buyer whole.

This is the most common misconception we encounter. Buyers assume a regulated-looking platform carries a compensation backstop for the metal. The protection comes from the property law of bailment and from vault insurance, not from a scheme.

"Fully insured" describes the vault operator's all-risks policy against theft, damage and mysterious disappearance. It does not insure against the platform's insolvency, fraud by the platform, or a shortfall between client claims and metal on hand.

The questions that matter: who is the named insured, what is the per-vault aggregate limit against total client holdings, and is the policy written to respond to client claims directly or only to the operator? A limit well below aggregate client value is common and rarely disclosed prominently.

An independent bar-list audit, published on a stated frequency by a named firm, is the single strongest signal in this whole analysis. It confirms that serials on the register exist in the vault.

Weaker forms — a self-published holdings total, an unnamed auditor, an audit older than a year — tell you materially less. Best practice on the platforms we track is a published bar list reconcilable to your own holding, plus periodic third-party inspection.

• Named audit firm and stated frequency
• Bar list reconcilable to your individual holding
• Vault operator named and independent of the platform
• Jurisdiction with a clear body of law on bailment

Ask them in writing, and treat an evasive answer as an answer. Is my metal allocated, pooled or unallocated? Who legally owns the bars? Which company operates the vault, and is it independent of you? Who audits it, how often, and is the report public? What is the insurance limit relative to total client holdings? What is the documented process if the platform enters administration?

Platforms with strong structures answer all six in public documentation. That correlation is why custody carries the heaviest weight in our scoring model, ahead of headline fees.

Split large holdings across at least two operators and, where feasible, two jurisdictions. Keep your own copy of statements and bar lists offline, because access disappears with the login. Reconcile serials annually.

None of this is expensive. It is the difference between an insolvency being an inconvenience and being a loss.

Insolvency is not primarily a legal event for a client; it is an information blackout. Withdrawals stop, the website stays up for a while, support stops answering, and the first authoritative communication may be weeks away from an administrator who does not yet know what the company holds.

In that window, the only thing that helps is documentation you already possess: bar serials, statements showing allocated title, and the custody agreement naming the vault operator. Clients who can identify their bars to an administrator are handled quickly. Clients holding a screenshot of an account balance join a queue.

• Withdrawals freeze before any announcement is made
• Allocated clients with serials are identified and returned first
• Unsecured claimants wait on the estate, often for years

You cannot audit a vault operator’s books, and no amount of due diligence reduces platform risk to zero. What you fully control is how much of your holding sits with one counterparty, in one jurisdiction, under one legal system.

For a holding meaningful relative to net worth, splitting across two operators in two jurisdictions costs a second set of minimum fees and removes the single point of failure entirely. That is usually a better use of money than optimising ten basis points of storage cost at a single provider.

Assume one day you will have no access to the account. Everything you would need to prove ownership must therefore live somewhere else: the custody agreement as a PDF, the current holdings statement with serials, annual transaction records, the name of the vault operator and the insurer, and the last published audit certificate.

This is a fifteen-minute annual task. It converts an unrecoverable situation into an administrative one, and it is the single highest-return piece of housekeeping in private metal ownership.

• Custody agreement and terms in force when you funded the account
• Holdings statements with bar serial numbers, exported annually
• Vault operator and insurer names, plus the latest audit certificate
• A written note of your intended liquidation route and its cost