Unallocated Gold
Also: Unallocated account, Book gold, Paper gold
Unallocated gold is a claim to gold against a bank or provider that is not backed by any individually assigned, physically segregated bar or coin.
Buy unallocated gold and you acquire no ownership of specific physical bars; what you hold is a claim against the institution running the account - much like a bank balance denominated in grams or troy ounces. The provider is free to pool the deposited gold with other clients' holdings or its own reserves, and need only return the equivalent value in gold or cash. The prevailing gold price determines the day-to-day worth of the balance.
Allocated versus unallocated - the decisive difference
| Feature | Allocated gold | Unallocated gold |
|---|---|---|
| Ownership status | outright ownership of the metal | contractual claim |
| Bar assignment | specific, by serial number | no individual bar |
| Insolvency protection | segregated, ring-fenced | ranks as ordinary creditor (default risk) |
| Storage fees | usually annual | often free |
| Liquidity | delivery may take time | immediately tradable |
| Typical providers | assay-card vaults, precious metal dealers | banks, gold savings-plan providers |
The most important distinction lies in counterparty risk: with allocated gold the metal itself stands behind you; with unallocated gold, repayment depends on the provider's solvency. If the bank fails, you take your place as an ordinary creditor in the insolvency - and Ireland's deposit guarantee scheme, which protects cash deposits up to EUR 100,000, does not cover gold account balances.
How unallocated gold is traded
Unallocated gold is the standard format in the wholesale market: the London interbank market (LBMA) settles the bulk of global gold trade through unallocated accounts. Banks and central banks transfer millions of troy ounces daily without a single bar leaving the vault. The historical gold prices show that the spot price formed in this market is the global reference for every other gold product.
For private investors, unallocated gold typically appears in these forms:
- A gold account at a bank - a balance in grams or troy ounces, often with no purchase premium, but carrying counterparty risk.
- Gold ETCs without physical backing - bearer notes that track the gold price but are not necessarily secured by physical metal.
- Certain gold savings-plan models - monthly instalments buy gold units as a book position; physical delivery is often possible only above a minimum quantity.
The savings-plan calculator lets you model long-term wealth building through regular gold purchases - whether you invest on an allocated or unallocated basis.
The tax picture
Unallocated gold in a gold account is treated for tax purposes like physical gold. In Ireland, a private individual's gain on selling gold is liable to Capital Gains Tax at 33%, after the annual personal exemption of EUR 1,270. There is no holding-period relief - the length of time the gold is held makes no difference to the charge, unlike in Germany, where a gain becomes tax-free after one year.
On VAT: where the unallocated account is denominated in investment gold - that is, gold of at least 995 fineness - the purchase is exempt from VAT under Schedule 1 of the VAT Consolidation Act 2010. The exemption applies whether the gold is held physically or as a book position. This is not a substitute for individual tax advice.
The risk profile at a glance
- Counterparty risk - the provider may default
- No segregation - no access to specific bars
- Possible leverage - providers may sell more gold than they hold (fractional reserve)
- Liquidity advantage - instantly tradable at the spot price
- No storage costs - often the cheapest way to hold gold
In a nutshell
Unallocated gold is cheap and liquid, but it carries a counterparty risk that physical gold ownership does not. Anyone seeking maximum security should favour allocated gold or physical holdings; anyone trading short-term or investing small sums benefits from the low costs of unallocated accounts.