Key takeaways
- Warehouse store Costco sells gold bars on its website, selling out quickly as soon as they are offered.
- Experts say gold has its place in a diversified investment portfolio because its price can rise when other assets like stocks and bonds fall.
- Gold also has a psychological appeal, dealers and buyers say.
Shoppers at the Costco warehouse club, known for its $1.50 inflation-proof hot dog and soda offering, stocked up on something a little fancier: gold bullion. gold of one ounce.
The bars, apparently a relatively new offering at Costco, have disappeared from digital shelves, according to company officials.
“I’ve gotten a few calls that people have seen online that we’re selling one-ounce gold bars,” Costco Chief Financial Officer Richard Galanti said on an earnings call last month . “Yes, but when we upload them to the site, they usually disappear after a few hours and we limit two per member.”
It’s unclear how much of the gold rush is actually happening at Costco. The retailer did not respond to messages asking for details, such as how many gold bars it bought and sold, or when it started putting gold bars on its site. The gold bars, made by precious metals refiners PAMP in Switzerland and Rand in South Africa, are for members only and cannot be returned, according to a list posted on Costco’s website.
Late last week, the bars briefly went on sale for $1,949.99, a roughly 4.3% markup from $1,869.30. spot price for an ounce of gold that day, according to a screenshot shared on social media.
But is gold a good investment? And if so, does it make sense to buy it at Costco, as if it were a bag of pretzels? Experts say it’s possible, in certain circumstances.
Why some investors like gold
There are good reasons to include a certain amount of gold in an investment portfolio, said George Milling-Stanley, chief gold strategist at State Street Global Advisors. Since the price of gold is not strongly tied to price movements of typical investments like stocks and bonds, gold can help protect investors against broader market downturns.
“This is often a very important safe-haven advantage in a portfolio,” said Joe Cavatoni, market strategist at the World Gold Council. “So when you go through a moment of risk and uncertainty in the market, you will see that gold will actually perform well.”
Case in point: Gold has shined brighter since October 7, when the Palestinian militant group Hamas launched a terrorist attack against Israel, prompting Israel to retaliate against Palestine with intense bombing and a threat of invasion of the Gaza Strip .
Fears of an escalation of the war and its spread to other countries pushed the price of gold to $1,921.10 an ounce on Monday, up from $1,830.20 on October 6, an increase 5% increase.
Experts who recommend gold generally say it should make up about 2% to 10% of a portfolio.
“Gold can help improve the returns of a well-balanced portfolio,” Milling-Stanley said. “And gold can also help reduce the volatility of the same portfolio, so it helps reduce risk.” Anything that drives risk-adjusted returns, I think, deserves a place in any portfolio.
However, there are some drawbacks to physically purchasing a gold coin.
“There’s a premium of up to 5% when you buy it, and there’s often a discount of up to 5% when you want to sell it,” Milling-Stanley said. “If you want to buy physical gold and take it home, then gold has to rise 10% before it breaks even.”
Buying and selling a real physical gold coin at a fair price without trading in bulk and having industry contacts can be so difficult that some gold experts do not recommend trying it.
Taylor Dibenedetto, owner of TMT Cash for Gold in Toms River, New Jersey, said his advice to potential retail gold investors is not to try it.
“Buying retail will never make you money over time,” he said.
Sales taxes pose another hurdle for retail gold buyers. Some states exempt purchases of precious metals from sales taxes, while others do not.
Dave Nelson, a sales manager in Portland, Ore., a state with no sales tax, said he made a quick profit the last time gold bars were sold. on sale at Costco. He said his Costco membership discounts and credit card rewards offset the premium the retailer charges.
“He arrived at my office the next day. I walked across the street to the coin shop and sold it for cash, making about $50 to $60 in profit when I was done,” Nelson said. “And then I crossed the street again, put that money in the bank and paid off my credit card.”
Is physical gold the best option?
Milling-Stanley said investors would be better off buying a Gold Exchange Traded Fund (ETF), a financial asset that tracks the price of gold without the friction involved by having a real piece of metal in your possession.
For some buyers, an ETF is not a substitute for the actual product. George Funkhouser, owner of D&Y Trading, a gold trader in Pennsville, New Jersey, said some of his clients are concerned about the stability of the financial system and the U.S. dollar and want to protect themselves against the possibility of a collapse of these things.
“The gold is still there,” Funkhouser said. “If you have it in your hands, you know that someone in the world will recognize it and value you.”
Indeed, some sales pitches for gold investments tend toward the apocalypse. The US Gold Bureau, an online gold retailer, sells a “survivalist starter pack” of gold and silver bars and coins, touting their usefulness for “bartering and trading in times of collapse financial “.
Nelson said he had a small stockpile of gold coins that could come in handy in the event of a major earthquake.
Gold can be useful as a hedge against inflation and falling value of the U.S. dollar, even outside of survival situations, Milling-Stanley said.
“There is no need to think about the Armageddon scenario,” he said. “But whenever we have significant weakness in the dollar or the stock market, the same sort of thing applies, and gold tends to perform. And I think that’s part of the appeal.
There is also an undeniable psychological appeal to physically owning a share of gold beyond its rational value in a portfolio.
“That’s, I think, one of the things that often drives people to want to own the physical product themselves, so they can actually manage it, which may not be the most efficient way to “investing, but it gives a different kind of satisfaction,” Milling-Stanley said. “There is an emotional satisfaction in being able to handle gold coins, for example, or small gold bars. No question .I think Costco products are going to be very, very popular.
Costco isn’t the only major retailer offering gold. Gold bars can be found on the Amazon and Walmart websites, although they are offered by third-party sellers and not the companies themselves.
The deep psychological appeal of gold explains why Nelson clung to one of the two gold bars he purchased at Costco.
“I realize that if I put my money in the stock market or an index fund and let it grow, it would grow a lot faster, but I can’t enjoy it the way I enjoy gold,” Nelson said . “It’s just fun to touch it and hold it and smell it…There’s always that Lord of the Rings moment: ‘Maybe I’ll just keep it.'”
