Gold has always been compared to cash. It has been used as money before the invention of paper money and also in trade though it is mostly considered a currency.
Regardless of how we categorize, gold is often considered as a currency. Here are some of the misperceptions about gold relative to cash.
Defining Gold Deposits
When gold is compared to cash, most people don’t realize that there are two main different ways of holding gold bullion in a bank account: (1) allocated gold and (2) unallocated gold.
Allocated gold is gold owned outright by an investor and is stored, under a safekeeping or custody arrangement, in a professional bullion vault. It is the property of the investor.
Allocated gold differs profoundly from unallocated gold which is the property of the bank.
Because allocated gold is not the bank’s property its owner is considered safe from the bank’s insolvency.
Unallocated gold is the most widely traded form of gold in the world. It hides a way of advantaging the provider – usually a bank – by subjecting buyers to a risk they will frequently remain unaware of until it is too late. The widely quoted ‘spot price’ refers to this unallocated gold, and they may sound cheap but in truth are very risky and expensive in the long run
Tags: Add new tag, allocated, bank, expensive, gold, trade, unallocated
