Gold outside the monetary system
Until 1971 gold stood behind the world's currencies; when the United States closed the gold window the peg disappeared and the metal shifted from a monetary base to a private reserve. The logic that keeps gold in portfolios today took shape then: it depends on no one and is no one's liability. Free ports grew out of a different need — storing goods in transit without duty; the Geneva Freeport has operated since 1888. Over time the demand for secure storage of valuables turned them into depositories for art, wine and precious metals: Singapore's Le Freeport opened in 2010, Luxembourg's in 2014.
Concept
Physical precious metals — gold and silver — remain a classic way to hold capital outside the financial system: they have no issuer that can fail and no counterparty credit risk. But gold can be owned in several different ways, and the form of storage decides what you actually own and which risks you carry.
Allocated and Unallocated
Allocated storage means specific bars assigned to one owner and segregated by serial number; the metal is legally yours and sits off the bank's balance sheet, so the custodian's insolvency does not reach it. Unallocated (pooled) storage is cheaper and easier to trade, but it is only a claim on the institution: the bank owes you a quantity of metal and you carry its credit risk. For preserving capital, allocated is the usual choice.
Quality Standard
The professional market runs on the LBMA Good Delivery standard: bars, their fineness and their provenance meet a single set of requirements, and valuation follows LBMA prices. This ensures liquidity — a bar from an accredited refiner is accepted at any major vault. Since 2012 the LBMA has required refiners to follow its Responsible Gold Guidance — responsible-sourcing rules that screen out metal from conflict zones and dubious sources.
Freeports
A freeport is a customs warehouse inside a free-trade zone where goods are stored with import duty and VAT suspended until they leave the zone. For precious metals, art and wine this removes import tax for the duration of storage. The main centres are Switzerland (the Geneva Freeport), Singapore (Le Freeport) and Luxembourg; Switzerland also remains the world's leading centre for gold refining.
Singapore and Switzerland
Singapore strengthened its position by exempting investment precious metals from GST in 2012; even after the GST rate rose to 9% in 2024, investment-grade metal — gold of at least 99.5%, silver of at least 99.9%, platinum of at least 99% — stays outside the tax. Together with Le Freeport this restored the city's role as a hub for physical gold trading. Switzerland has traditionally not charged VAT on investment gold and remains a leading refining centre: a notable share of the world's metal flow passes through its plants.
Costs
Physical metal carries its own cost: storage and insurance fees, the bid-ask spread, and a premium over spot for small bars and coins. Precious metals are therefore held as insurance and a store of value, not as a source of current income.
Who holds metal and why
The main buyers of physical gold today are central banks. In 2022–2024 they took more than 1,000 tonnes a year off the market, a record since the 1950s; in 2025 the pace slowed to roughly 863 tonnes but stayed well above the 2010s average (around 470 tonnes). The turn toward metal was accelerated by the 2022 freeze of the Bank of Russia's reserves: some 300 billion dollars immobilised in Euroclear infrastructure showed that currency reserves held in accounts are vulnerable to a political decision, while physical metal in one's own vault is not. More detail is in the review of capital relocation from Russia.
The same logic works at the level of private capital: a physical-metal allocation serves as insurance against systemic risk and produces no current income — it is held for portfolio resilience, which is typical of family office strategies. State practice is telling too: in 2013–2017 the Bundesbank moved part of its gold from New York and Paris to Frankfurt to keep a larger share of the reserve under direct control.
What's changing
A combination of central-bank demand, geopolitical risk and inflows into exchange-traded funds pushed gold to record highs: by mid-2026 an ounce costs around 4,200 dollars against roughly 2,000 dollars in 2023. The storage environment is changing too: the secrecy that free ports were known for is giving way to transparency — mandatory inventories, provenance checks and automatic exchange of data under CRS. Digital formats have appeared — tokenised claims on specific bars; legally they revive the original question of whether you own the metal or an issuer's liability.
This material is for informational purposes only and does not constitute individual advice.