Two investors can hold the same nominal quantity of gold and own entirely different things. Allocated holdings assign specific, serial-numbered bars to the client, held off the custodian's balance sheet. Unallocated holdings are a general claim on the custodian: in insolvency, the holder joins the queue of unsecured creditors.
The three questions that settle it
Who holds legal title, where are the bars physically stored, and who audits the bar list. A vault operator that cannot answer all three in writing is offering a promise, not custody.
Cost is the honest trade-off
Allocated storage carries an explicit annual fee because segregation, insurance and independent bar audits cost money. Unallocated looks cheaper precisely because the investor is absorbing counterparty risk in place of a storage charge.
Tokenised claims inherit the structure beneath them
A token is only as sound as the custody arrangement it references. The useful diligence question is not what the token does on-chain but whether the underlying metal is allocated, audited and legally bankruptcy-remote. Producer-level backing matters here too, which is why we track physical reserve evidence at operators such as Burlcore Mining Uganda rather than relying on issuer statements alone.
