Purchasing Gold Bars (and Other Precious Metals)
Written By: Ryan Rink, CFP®, EA, ChFC®, CLTC®
I stopped at the Pewaukee Costco on my way home from work to grab some diapers for our little one. After bolting past the regular internet sales representative at the store entrance, I noticed another Costco employee selling something else – 1 oz gold bars. The employee was talking to a gentleman interested in purchasing them. When he asked her what the benefits were of owning gold, she proceeded to tell him, “It never goes down in value.” I was baffled by this response, as this is completely false. Below is the price chart for gold since 1979, which clearly illustrates the price of gold can decrease in value.
Gold bars have become a top selling item at Costco in the past year, with shipments commonly selling out shortly after arriving at the store. While I was shopping, there was a different employee near the checkout lines yelling out the amount of gold bars that were remaining approximately every 10 minutes. Gold has also been a great performer in 2024, up over 20% through September, which has helped sales even more.
In a world with inflation concerns and economic volatility, investors sometimes turn to “safe haven” physical assets like gold. The convenience of buying gold bars at Costco, a trusted name in retail, only adds to its appeal. It’s easy to see why shoppers are snapping them up so quickly.
Hidden Challenges of Buying and Selling Physical Gold
If you choose to purchase physical gold bars (or other precious metals), it’s important to be aware that it can be difficult to ultimately find a place to sell them. Unlike more liquid assets such as stocks or ETFs, physical gold bars can be harder to turn back into cash. There are gold and coin shops out there, but they will typically negotiate on price and may charge a commission, which results in a sale price that could be lower than market value.
Additionally, because physical gold is a tangible item, storage and security are concerns. Safes, bank vaults or secure storage facilities all come at an additional cost. Physical gold also does not earn dividends, unlike owning shares in a gold ETF.
Recognize Sales Tactics
While it’s not my intention to discourage anyone from buying gold bars, it’s important to point out some of the tactics being used to push these sales. High-demand items create a sense of urgency. When a Costco employee announces the remaining stock of gold bars every 10 minutes, it encourages impulse purchases. The perception that “this deal won’t last” can drive customers to buy without fully considering the complexities of the investment.
Costco’s reputation for selling quality products at reasonable prices also gives shoppers confidence that they are getting a good deal. However, even though Costco is a trusted retailer, that doesn’t mean it’s always the best way to purchase precious metals. Price comparisons with specialized gold dealers are still worth considering, as well as understanding any added premiums to the spot price of gold.
Gold bars and other precious metals are not a “one-size-fits-all” investment. As with any investment vehicle, it’s vital to know both the benefits and risks before making the purchase.