Should you buy gold at Costco?

After months and millions of dollars in sales, the option of buying gold at Costco is not going away. Let’s find out what’s going on.

A few months ago, I started hearing about a new item for sale at Costco: gold.

Now, gold has been for sale in the form of jewelry for some time, and I think that collectible coins in precious metals may have even been available.

But buying a gold bar at a Costco is a relatively new one. According to one source, they started selling gold bars in October 2023.

The idea trended. People hit their TikToks, and went wild.

And the wider world noticed

Is this madness, or is this brilliant? Or both?

There’s gold in them thar shelves

If you have a Costco membership, you can, if it’s in stock, purchase a 1oz gold bar for $2,499.99.

Here are the specs of what you get:

Basically, it’s 24 carat gold with a graphic on it, like a coin. It comes in a small blister pack, and there you go.

You can buy a maximum of 5 of these items, so if you were planning on building a Scrooge McDuck-style swimming pool, this isn’t the way to do it.

And if you’re wondering what the PAMP stands for, it’s Produits Artistiques Métaux Précieux or “Artistic Precious Metal Products”. It claims to be the world’s largest independently owned precious metal refinery.

Also, Costco notes that the item is non-returnable. So when you make the decision to buy, there are no takebacks.

Why is this trending now?

Gold has always been a haven for the fearful. The standard cliche is that it’s a “hedge against inflation”, so once inflation became a thing, people went right for gold.

The idea is that gold will maintain its value (and even skyrocket), when other investments start to tank.

But the thing is, if you wanted to buy gold, there hasn’t been an easy way to do it. You can buy jewelry, and you can buy mutual funds that own gold, but I don’t know about you, but gold bars aren’t available at your average Target.

And then Costco stepped in, and democratized the buying of gold.

Millions of people have a Costco membership, and buying gold became as easy as checking out online (or picking it up at the warehouse).

So the combination of fear and ease made this new gold rush almost irresistible.

Is it a good deal?

According to goldprice.org, gold is going for about $2,400 an ounce right now.

At $2,500, that’s a 4% markup on your Costco gold bar. Which, to my mind, isn’t bad at all. You’re paying 4% for the convenience of not having to deal with PAMP Suisse, or your local pawn shop, to get your gold fix from the comfort of your own Costco membership.

And for Costco, it’s an absolute smash. According to one estimate, Costco has been making $100M-$200M per month in gold sales.

So maybe it’s Costco that has that Scrooge McDuck swimming pool.

Is this worth it?

God no. Absolutely not. Back away slowly. Stand so far back you can’t even see it.

Okay, this is not financial advice, but this has all the makings of a bad idea.

First off, gold, by nature of its “hedge against inflation” mantra, is primarily fear-based. You’re trying to protect your assets that you see being taken away from you.

Any financial decision that is primarily fear-based in nature is not a good deal.

But wait, it gets worse.

In ten years, gold has gone from about $1,300 an ounce to $2,400 an ounce, a gain of about 85%, or about 7% return a year on average.

By contrast, the S&P 500 went from about 2,000 to 5,500 in that same timeframe, a gain of about 175%, or about 12% a year on average.

Not to put too fine a point on it, but here is a page that compares the gold spot price to the S&P 500. Look at it closely. Except in very small intervals, the S&P 500 blows away the returns made by gold.

In the last ten years, in only three of them did the price of gold out perform the S&P. And in some years, like 2021, the difference was 35%, and not in gold’s favor.

There’s simply no comparison.

What about selling?

“But,” I hear you cry. “This is just for a short-term hedge. I’ll sell the gold when the world stops being a trash fire.”

Well, putting aside whether this world really is a trash fire, and if so when it might end, let’s say that you want to sell your gold bar. How might you do that?

Costco won’t help you there, but you could try your local pawn shop. Alas, they have a 38-50% profit margin, so good luck making your money back.

Many gold dealers, if you can find a reputable one, charge a spread of 5-8%, so if the price of gold has appreciated a lot, you could still get some profit out of it.

But you get my point, I hope. While buying gold is as easy as clicking a button on costco.com, selling that gold will be anything but, and most likely a terrible deal at that.

Calm your nervous system

I know things are scary out there right now. And I know that many people’s financial situations are precarious at best, with only a medical emergency standing in between you and catastrophe.

But making financial decisions based on fear is going to make a bad situation worse. And buying gold is always a fear-based decision.

If you have $2,500 to spare, then don’t buy a gold bar, which, by the way is a tiny thing anyway, measuring only 1″ x 1.5″, not the gold brick you envision it’s going to be.

Instead, here are some ways you could spend that $2,500:

• Pay down some debt
• Start/fund a Roth IRA
• Create/build an emergency fund

Out of all of them, the emergency fund might be the most nervous-system calming of all. When you have $2,500 (or more) set aside solely for emergencies, you will feel better every single day. Most emergencies cost less than that, so you’ll be protected in most cases. Try it and see.

But all of these are better ideas than buying a shiny piece of metal from a warehouse store.