Why You Shouldn't Buy Costco Gold Bars
Costco is selling one-ounce gold bars. My first reaction when I heard the news was, Really? But the more pertinent question may be, Why?
There is a good reason why the bulk discount store is selling gold, and thus far it's been poorly understood by the media and the general public. More importantly, there are even better reasons not to buy gold bars from Costco.
Opinion: Strange Place to Sell Gold
The media has been fascinated with the oddball nature of the story that Costco is selling gold bars. It's definitely something I've never seen during my decade in the gold industry.
Sure, you will sometimes see gold bars sold at flea markets and pawn shops. But I've never seen or heard of gold being sold at a place like Costco.
While this story is primarily a curiosity, it has revealed a deeper truth about how gold is discussed. Even among the financial news media, the benefits of gold as an investment are poorly understood. The gold market is usually ignored when the precious metals prices are moving sideways or trending lower.
Many professionals in finance are quick to dismiss gold as a useless "pet rock" because gold offers no yield in the way that a Treasury bond or dividend stock does. Indeed, much of the reporting about the Costco gold bars has been of a negative slant. The stories have focused on the notion that buying gold is not a good idea.
Aside from taking cheap shots at gold as an asset, there are some important points missing in the news coverage of the Costco gold bars.
Why Costco Is Selling Gold Bars
Costco has been selling gold bars from PAMP Suisse and Rand Refinery. These well-known brands come from Switzerland and South Africa, respectively. Costco is only offering the one-ounce size, however (1 troy oz). They are also selling platinum bars from PAMP, as well.
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PAMP Suisse Gold Bar pictured next to an American Gold Eagle coin.
The bars come in a protective plastic casing that serves two purposes. It is the bar's assay card, which is essentially a certificate of authenticity. The packaging also protects the bar from environmental damage. This is important because the bars are made of 99.9% pure gold. When gold is in that pure of a state, it's actually remarkably soft and subject to bending or warping. The packaging not only lets you know that the bar is authentic and from a legitimate refiner, but it also protects it from damage.
So we know the gold bars are legit. But why would they be sold a wholesaler like Costco? My perspective is that it's all about the company's reputation for bulk purchases. Gold is a concentrated store of value. It still functions as much as a currency as it does as a commodity. In that sense, gold is a "bulk" form of money. I haven't seen anyone else talk about this angle when covering this story so far.
Why Are People Buying Gold Bars From Costco?
The reasons why we're seeing gold enter the mainstream consciousness are likely multifaceted. We just experienced the highest inflation in the U.S. in at least a generation, and gold has traditionally served as an effective inflation hedge. Earlier this year in the spring, the economy also endured the collapse of several prominent banks. Anytime people are worried about the stability of the banking system and are wondering if their money is safe in a bank, the natural alternative to turn to is a tangible asset that holds its value over time like gold.
Perhaps the fact that gold is being sold as Costco is a sign that consumers are gradually gaining a greater awareness of gold as a safe haven asset. As unheard of it as it is in the West, seeing gold sold in similar settings is much more common overseas. (You can even find these types of gold bullion products sold in vending machines in places like Dubai.) This is particularly true in countries where there is a more immediate memory of currency devaluations or currency collapses. There is simply a much stronger affinity for gold outside of North America and parts of Europe.
Why You Shouldn't Buy Gold Bars From Costco
I'll reiterate that the types of gold bars that Costco is carrying are legit. From what I've seen, they're also being priced appropriately. However, there are three major caveats that make buying gold from Costco a bad idea:
- The bars are only sold online, and each Costco member is limited to just two gold bars. At a professional gold and silver bullion dealer like Gainesville Coins, you can buy virtually as many gold bars as you like.
- Costco is not allowing customers to return their gold bars. This is a big red flag. Any bullion dealer will always buy back your gold, and will always buy back any product they sell.
- Costco doesn't have employees who are gold experts. It's doubtful anyone working at the company can explain much about why gold bars are valuable, or what makes PAMP Suisse a good brand. Trust a real gold bullion dealer with industry knowledge like Gainesville Coins.
Frequently Asked Questions About Costco Gold Bars
Do they sell gold bars at Costco?
Not in the Costco stores. The gold bars are only available online through the Costco website. They do not accept refunds or returns.
When will the Costco gold bars be available?
Gold bars are available at Costco now, although they have regularly been selling out within a few hours.
Is the gold at Costco a good deal?
The bars are from reputable brand names such as PAMP Suisse. The premium you will pay for a gold bar from Costco may be higher than at a bullion dealer, however.
Where are some alternative places to buy gold bars besides Costco?
You should buy your gold bars from a professional gold bullion dealer such as Gainesville Coins.
Costco store image via Creative Commons license CC BY-SA 3.0
Read more about the silver and gold markets from the expert analysts at Gainesville Coins:
Gold Held Up Extremely Well In September Against Rising Real Rates
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Everett Millman
Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.
In addition to blogging, Everett's work has been featured in Reuters, CNN Business, Bloomberg Radio, TD Ameritrade Network, CoinWeek, and has been referenced by the Washington Post.