rewrite this title Fool’s gold? Expert questions whether Costco’s $1,949 one ounce gold bars are REALLY a good deal, as shoppers rush to snap them up amid rampant inflation and bank failures
Costco is experiencing a rush for gold bars, executives announced earlier this week.
On Tuesday, Chief Financial Officer Richard Galanti told investors that the one-ounce gold bars, which cost $1,949 each, sold out “within hours.” But are they really a good investment?
“I thought it was quite curious: It’s not often you hear about gold bars being sold in a place that doesn’t specialize in them,” said Everett Millman, a precious metals specialist at coin dealer Gainesville Coins.
Gainesville Coins and a plethora of similar companies sell the same bars that Costco stocks.
The retailer has launched two 24-carat gold bars Rand Refineryfor $1,949, and PAMP Switzerlandfor $1,979.
Costco has rolled out two gold bars on its online site, one from PAMP Suisse (left) for $1,979, and another from Rand Refinery for $1,949.
Richard Galanti, Costco’s chief financial officer, told investors that the one-ounce gold bars, which cost $1,949 each, sold out “within hours.”
Other retailers sell the bars at a similar cost, but Costco customers must pay a membership fee of $60 or $120 per year.
Members are also limited to purchasing two bars each, making it difficult to build an investment that would lead to financial security.
Millman suggested that Costco’s ability to introduce new products to consumers – coupled with economic uncertainty in the US – could be driving the hype.
“The way I would explain the question is that for most of the year, people have been afraid of the stability of the banking system. We were very concerned that monetary policy could push the world into recession,” Millman said. .
“Every time there is fear or anxiety in the financial market, investors turn to gold as a safe haven,” he added.
The value of gold has been recognized around the world for thousands of years, which is why many people today consider it a safe investment that can weather any economic storm – including the collapse of the relatively modern US dollar.
According to CNBCgold has risen by more than 15 percent in the past year and by more than 55 percent in the past five years.
Everett Millman, a precious metals specialist at coin dealer Gainesville Coins, said the rush to buy gold from Costco was “curious”
Gold has risen by more than 15 percent in the past year and by more than 55 percent in the past five years
Americans looking to invest in gold today have two very different mainstream options.
They can buy physical gold, such as Costco’s gold bars, or an exchange-traded fund (ETF), which acts like a stock that tracks the value of gold.
A key metric in assessing the cost of physical gold is known as the spot price, which was around $1,860 on Thursday, according to the precious metals company. Kitco.
“The spot price means, ‘What is the price right now at this place, at this location?’” Millman said. ‘Depending on availability and region, the spot price will vary.’
The gold bars sold by Costco carry a slight premium, but that is to be expected given the cost of production.
“The price you’re going to pay for a piece of precious metal is always going to be the spot price plus a small premium,” Millman said. That premium applies to the costs of making the bar, but also to the dealer’s profit margin.’
There’s been a frenzied attempt to secure gold bars, with one person landing two and sharing her thoughts – including that they were ‘heavier than I thought’
To sell gold, Millman advised that the bar can be taken to a dealer, but there are fees associated with the sales process.
“Generally speaking, (the seller) would go to a precious metals dealer. They almost always operate in a two-way market. They will always buy back the products they sell, but they will always pay a small percentage that is less than what they sold it for,” he said.
“It was usually between 1 and 2 percent, that was always the standard, but since about 2020 or 2021 when the price for the metal started to rise, that profit margin has increased to closer to 5 percent,” he added .
That means the value of the physical gold an investor owns will typically be closer to the spot price when he wants to sell it back to a dealer.
Nevertheless, Millman suggested that in his view a diversified investment should contain a maximum of 5 percent in gold, but that how it was held was important.
“There is no compelling reason why anyone should invest in physical gold rather than an ETF,” he said.
“Gold ETFs are much more convenient and they are more familiar with the way the average investor would invest in something – it’s like investing in shares,” he added.
But for many, keeping gold in an inaccessible fund undermines its value.
“You don’t have to worry about the liability of storing the gold, but the downside is that you can’t physically receive that gold. People can’t save it and pass it on to their children,” Millman says.
Investors will also incur losses when trading gold ETFs because they charge fees.
Part of the craze surrounding Costco’s gold bars may simply come from the fact that consumers trust products that Costco selects and offers for sale.
On the site, a five-star review for the PAMP Gold Bar reflected this sentiment: “I have tremendous confidence in Costco. I bought this without any hesitation as it is sold by Costco.”