In short
- With allocated metal, a particular bar is kept for you as your own property.
- With pooled metal, you hold a share of metal kept for many people.
- Pooled metal may be an interest in a managed investment scheme.
- Where you keep a bar, and who stands behind the keeper, shapes what you hold.
You have chosen silver or gold, and maybe a dealer too. Then the dealer asks whether you want it allocated or pooled. The two choices can look alike on a receipt, but they are two different things to own.
Allocated: a bar that is yours
With allocated metal, a particular bar is kept for you as your own property. The law calls this bailment: the keeper holds the bar, but it stays yours.
Buying bullion directly is not making a financial investment under the Corporations Act. So the purchase is not a financial product under that part of the law. A particular bar kept for you as your own property is unlikely to be one either.
Pooled: a share of a larger store
With pooled metal, you do not own a particular bar. You own a share of metal held together for many buyers. At the Perth Mint, for example, you own an undivided share of the pool, in common with the other clients in it.
ASIC, the corporate regulator, says pooled metal may be an interest in a managed investment scheme. That puts it closer to a fund than to a bar on a shelf.
Side by side
| Question | Allocated | Pooled |
|---|---|---|
| What you own | A particular bar | A share of a pool |
| How the law sees it | Unlikely a financial product | May be a managed investment scheme |
| What to ask about | Who holds the bar and where | Who runs the pool and how it is held |
In words: with allocated metal you own a particular bar, kept for you as your own property, and it is unlikely to be a financial product. With pooled metal you own a share of a pool, and ASIC says it may be an interest in a managed investment scheme. For allocated metal, the question is who holds your bar and where. For pooled metal, it is who runs the pool and how the metal is held.
When the keeper is the Perth Mint
The Western Australian Government, through its Treasurer, guarantees payment of the cash equivalent of gold the Perth Mint owes under its Act. The guarantee is on what the Mint owes. It is not a guarantee on bars or coins you already hold.
If your super fund holds the metal
In a self-managed super fund, a bullion coin is treated as a collectable only if it is worth more than its face value and sells for more than the spot price of the metal in it. Collectables carry extra rules, such as insurance in the fund’s name within seven days.
The fund also cannot store a collectable in a related party’s private residence. The trustees keep a written record of the decision on where it is stored. Your fund’s accountant can confirm how this applies.
Two lines at the counter
In Australia, buying investment gold (99.5% pure), silver (99.9%) or platinum (99%) as bars, wafers or bullion coins from a dealer carries no GST. Collector and proof coins are not counted as investment metal, so GST can apply to them.
Bullion dealers are covered by Australia’s anti-money laundering law. A dealer reports any cash payment of $10,000 or more to AUSTRAC, the financial intelligence agency, and must check who you are on larger purchases.
My own view
Silver is the metal I prefer, because I see it as more than a store of value. It’s just an opinion. You don’t have to like it or agree with it.
Where this leaves you
Allocated or pooled is a question about what you own. Once you know that, the next questions are simple: who holds it, where, and who stands behind them.
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Nicholas holds some of the assets discussed in this article.
Education only, not personal or financial advice.