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Costco keeps selling out of gold bars. Experts warn rush is more ‘mob mentality’ than sound investment decision

Robert Nickelsberg / Getty

There's a modern-day gold rush taking place at Costco, with the big-box retailer reportedly selling up to $200 million worth of gold bars each month, according to a Wells Fargo analysis. The sales are a boon for Costco, but it's less clear if they are a win for the customers buying up the bullion.

Customers have been snapping up the one-ounce bars since last October, paying around $2,000 a pop. At a time of runaway inflation and growing economic uncertainty and political instability, investing in gold can seem like an attractive alternative to other types of investments that consumers are losing faith in.

So the fervor makes some sense, and the desire to buy gold is nothing new. But real gold can be hard for the average person to buy without a significant markup, if they can find it at all. Costco, on the other hand, is a reputable seller that consumers trust.

But financial advisors urge caution. First, they say investors must be smart about why they are buying physical bars. If it's out of fear or extreme doom and gloom about the future, that's never a good time to invest in anything. "When economic anxiety or instability is high, the people who typically profit from precious metals are the sellers," notes the U.S. Commodity Futures Trading Commission. "Premiums, fees, and commissions can also drain the profit from your purchase."


"The mob mentality of rushing to Costco to purchase gold is not done as a sound investment decision," says Steve Azoury, a chartered financial consultant based in Michigan. "Instead, it’s more like the rush of purchasing a shirt at Taylor Swift concert. As a small portion of one’s portfolio, gold could serve as a hedge against inflation, but don’t bet the farm on it."

It can also be easy to overpay, since the average consumer doesn't have much experience buying and selling precious metals. And financial planners say it doesn't have the same long-term returns that stocks have. Though nothing is guaranteed in the future, for retirement savers, it may not be the best option.

Selling physical gold can be more difficult than buying it, says Jake Skelhorn, a certified financial planner (CFP) in Florida. And the only way to make money off physical gold is to sell, whereas stocks can offer dividends.

"In some cases, you might be able to sell it quickly, but that usually means you’ll be getting much lower than market or 'spot' price," says Skelhorn. "Either way, selling gold requires physical delivery to the buyer, whereas stocks, bonds, ETFs, [and] mutual funds can be sold from the palm of your hand."

Financial planners also point to the storage and insurance costs of physical gold. It's a lot easier to steal a Costco gold bar than it is an IRA balance.

And then there are the tax implications. Physical gold bars are taxed like collectibles, making them subject to a maximum rate of 28%. That's significantly higher than the standard long-term capital gains rate applied to other investments (or even gold-backed ETFs).

That said, Chase notes that the long-term value of gold has increased over the past 20 years. It also doesn't hurt to use gold to diversify a portfolio, as long as it's a small percentage, say 5% or less, of holdings.

Still, due to the complexity, Costco customers might be better off paying $1.50 for a hot dog and purchasing their investments outside the retailer.

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