Unallocated gold is a bookkeeping device by which a bank or other enterprise provides you with notional gold. The gold is a liability to you on their balance sheet. It is synonymous with gold 'accounts' and its holders are unsecured creditors.
It arises from an important legal difference between the terms under which banks look after their customers' valuables. Unallocated gold is formally a deposit, which becomes the bank's property and its liability to you as a depositor. The alternative agreement style - known as allocated - obliges the bank to hold your gold as your outright property, under a custodial or safe-keeping contract.
Under the law a liquidator returns your formal property to you if a bank fails. But where it is your asset - like unallocated gold (not your property) they almost certainly cannot return it to you. Instead you would be in a pool of unsecured creditors waiting to see what cash the liquidators might raise in selling all the bank's assets. This sale would include non-performing loans, derivative and bond portfolios, and whatever stock of gold you might think was backing your unallocated gold account.
Read More: http://www.bullionvault.com/help/Definitions/definition_unal...
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