Physical capacity is finite, insurance has repriced, and the volume of metal being moved from unallocated arrangements into segregated allocated accounts has grown faster than the vault estate.
The questions worth asking
Where exactly is the metal, in whose name, with what bar list, audited by whom and on what frequency, and what happens to the arrangement if the custodian is acquired. Anyone who cannot answer those in writing is selling a promise rather than a service.
The cost of getting it wrong
Unallocated is credit exposure dressed as ownership. That is acceptable if it is priced and understood, and dangerous when it is not.
Segregation in practice, not just on paper
Segregated storage is frequently described as though it were a single, uniform standard, when in practice the degree of physical separation between one client's bars and another's varies considerably between custodians. Some vaults maintain fully bar-by-bar segregation with an identifiable list matched to a specific owner at all times; others operate a form of pooled segregation that is contractually allocated but physically co-mingled until a specific delivery is requested. The distinction matters most in a stress scenario, precisely the moment a holder most needs the protection to be real rather than contractual.
A written bar list, updated and reconciled on a defined schedule and independently verified rather than merely self-reported by the custodian, is the practical test that separates a genuine allocated holding from an arrangement that only behaves like one when nothing goes wrong.
Insurance is not a substitute for location
Insurance policies covering vault contents typically have sub-limits, exclusions and claims processes that are far slower and less certain than the recovery a holder gets from unambiguous title to identified bars. Holders who lean on the existence of an insurance policy as their primary comfort are, in effect, accepting counterparty and claims risk in place of the property right they believe they hold. That trade-off can be a reasonable one for small holdings; it is a much larger decision for institutional-scale allocations, where the insurance market's total capacity may not even cover the position in a severe scenario.
As capacity in London tightens and pricing rises, holders who have never had to ask these questions before are being forced to for the first time, which is arguably a healthy development for a market that has grown considerably faster than the scrutiny applied to its custody arrangements.
