WSJ on Costco selling gold
You Can Buy Gold Bars at Costco. But Are They Worth It?
Ron Williams,a retired Air Force production superintendent in Utah, usually buys gold investment coins and bars from his precious-metals dealer. But when he found 1-ounce gold bars available on Costco Wholesale’s website recently, he decided to give them a shot.
“They seem pretty competitive with other bullion dealers,” says the 62-year-old Williams. “And the shipping is free.”
While he doesn’t expect to routinely buy gold bars at the big-box retailer, Williams is now among a vocal number of Costco fanatics and gold buyers who have flocked to the retailer’s website over the past year when it periodically puts up limited quantities of gold bars for sale.
Members of Facebook groups and Reddit message boards dedicated to Costco and gold post alerts when the gold bars are available. Those who miss out on the fast-moving items often grumble, while those who made purchases often report their success, sometimes including pictures and prices paid.
Costco declined to comment about its gold-bullion product. In earnings calls during 2023, finance chief Richard Galanti acknowledged the popularity of the gold bars, saying that when the retailer loads them on the site they are typically sold within a few hours. Even with a limit of two per member, Galanti said in Costco’s fiscal first-quarter earnings call Dec. 14 that the company sold over $100 million in gold during the quarter.
Some buyers of Costco gold are bargain hunting, and others are likely buying gold for the first time. Yet the same types of gold bars the retailer sells are available elsewhere at similar prices, and investors can trade gold-backed exchange-traded funds without worries about theft or storing physical gold. So why buy from Costco—or other general retailers like Walmart—instead of a traditional gold seller, and is it a good deal?
Reaping rewards
While gold dealers might sell a variety of gold products—both coins and bullion bars—when Costco’s website opens gold sales often it is only in 1-ounce minted bullion bars, usually one of two types of bars from Swiss-based refiner MKS PAMP or one type from South Africa’s Rand Refinery. Costco also has sold gold in other amounts and recently offered silver coins.
What’s more, Costco doesn’t have spot gold prices on its website for easy price comparisons. Because gold prices are volatile, listed prices will vary, and Costco’s price may be above or below the day’s spot gold price. On Dec. 14, for instance, a 1-ounce PAMP 2024 Azure Dragon minted gold bar was available on Costco’s site for $2,079.99, about 2.5% over spot gold prices that day. It was gone in less than two hours.
Regardless, buyers say the cash-back rewards they get make it worth the buy. Costco members who upgrade to the retailer’s $120 executive membership earn 2% cash-back rewards to spend at the warehouse club, so buying a $2,000 1-ounce gold bar nets them $40. Others say they earn credit-card rewards, which lowers the cost as well.
Costco shoppers also get free shipping and don’t pay credit-card-processing fees. Online gold dealers charge for secure shipping and pass on the credit-card-processing fees to customers, which may add at least 3% to the final cost. On a coin costing $2,079.99, that is an extra $62.40. Dealers often have lower prices for customers paying by check or money wire.
Trusted source
The challenges with physical gold buying are twofold: the seller’s reputation and the price.
“What are you buying and how do you know the purity? And there can be very large premiums on those bars or those coins,” says Will Rhind, CEO of GraniteShares, which issues gold ETFs.
But with Costco, he says, there is an element of trust that might encourage new buyers to jump in.
Arun Sundaram, a retailing analyst at CFRA Research who covers Costco, says the periodic gold-bullion offerings are all part of Costco’s treasure-hunt-like shopping experience. “That’s one of the reasons that Costco has done so well in recent years. That’s what drives traffic and also membership growth,” he says.
“You can put this in the same category as Costco’s $1.50 hot dogs and drink combo, or the $4.99 rotisserie chicken product. Those are just traffic drivers, not profit centers,” he adds.
Peter Thomas, chairman of the offshore development for Ausecure, a Chicago-based precious-metals wholesaler and retailer, thinks Costco’s decision to offer PAMP bars in particular is smart, given the high quality of the product. PAMP’s flagship Lady Fortuna bar has a proprietary QR code on the card that identifies the piece that is also embedded in the bar itself to prevent counterfeiting. The QR code includes when the bar was poured and other identifying information.
“You’re guaranteed that it is legitimate gold and I could buy one and put it in the safe at home or in my safety-deposit box. It’s a serious investment,” says Thomas, a longtime gold dealer who adds that he would feel comfortable buying a PAMP bar from a noncustomer.
Storage and sales
Costco buyers may be getting good deals on their purchases at the store, but they have other costs to consider once they receive their goods. There are the potential costs to safely and securely store the gold. And if and when they want to sell it, they need to do their homework to find a gold dealer who will negotiate a fair price since Costco isn’t a dealer and doesn’t allow gold-bar returns.
Reputable dealers may offer anywhere from 3% to 5% or more under the spot gold price, depending on the type of gold bar or coin and its quality. And all gold owners, whether in gold-backed ETFs or in physical form, will have to pay capital-gains taxes of up to 28% when they sell because the Internal Revenue Service characterizes gold as a collectible.
These dealer discounts and storage costs are why ETFs are many investors’ preferred way to own gold.
Physical-gold buyers are different from ETF buyers, says Eric Freedman, chief investment officer at U.S. Bank. “There’s the fear that if they own it in ETF form, perhaps there are scenarios that exist where they may not be able to access that capital,” he says.
Mike Fuljenz, president of Universal Coin & Bullion in Beaumont, Texas, says gold coins became useful for him when a recent hurricane disrupted banking and otherservices for a while.
When there were limits on withdrawals at automated-teller machines, he sold small gold pieces to a local dealer for cash. “This is kind of the reason why people like physical gold,” he says.
