Following on from
this post from 2009 where I identified five types of storage (Segregated Allocated, Unsegregated Allocated, Unsegregated Physical Backed, Unallocated Fully Hedged, Unallocated Unhedged), we now have confirmation that "Allocated" metal at a bullion bank is unsegregated from this
interview with Kyle Bass (42 minute mark) where he talks about bars being all over the place when they did an audit.
The unsegregated nature of bullion bank allocated is why Bob Pisani picked up the wrong bar in his
visit to the GLD vault as part of a HSBC promo.
This unsegregated storage is not necessarily a problem and would not make a difference in any bankrupty of a custodian as the key "segregation" is the specific bar numbers and weights in the client name. Whether bars belonging to two different clients sit together on the same pallet or are on separate pallets separated by air, I cannot see making a difference.