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Is gold a good investment right now? Pros weigh in.
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For between $60-$120 a year, Costco members enjoy deeply discounted household essentials, grocery items and more. The retailer has even branched out into some, um, more unique offerings such as engagement rings, swimming pools and even caskets, at low prices. And now, they’ve entered the commodity market with a new inventory item: gold bars.
Costco is now selling 1-ounce, 24-karat gold minted bars. According to Costco’s website, the non-refundable bars are Swiss-made, carbon neutral, and each bar is individually controlled, registered and secured within protective CertiPAMP packaging.
The going rate for these gold bars? About $1,930, as of Thursday morning. And Costco limits members to just two bars. Even so, apparently, they are selling out.
Is that a deal? The price for gold today is around $1,850 per ounce, as of Wednesday, and Costco is selling bars for a bit more than that. “Like all retailers, they have to make money too,” says Mark Struthers, a certified financial planner at Sona Wealth Advisors. “A 5% or 6% markup isn’t bad and you probably won’t do much better in other places.”
The offer at Costco relative to the spot gold price is competitive, says DepositAccounts.com founder Ken Tumin. “Costco members can also receive cash back by using their Costco credit card,” Tumin adds. “It’s important to note that these gold bars are only available online at Costco’s website, there’s a limit of two bars per order and their availability has been limited, with supplies running out quickly.”
Michael Klass, owner of Santa Monica Jewelry & Loan, in Santa Monica, California — which buys gold, art and estates — says: “It’s too bad that they’re selling gold bullion in limited quantities; but what they’re charging is very fair. It’s gonna open the eyes of consumers who haven’t been exposed to the physical market.”
As for where to buy gold bullion in addition to Costco, some banks sell gold bars and online licensed retailers like the American Precious Metals Exchange (APMEX) and JM Bullion sell gold by weight, quantity and price. As of Wednesday, one ounce of gold from APMEX was available for $1,903.79 and JM Bullion was selling for $1,973.77 when paid for by e-check or wire. Consumers can also find gold at local dealers, however experts recommend doing due diligence to be sure you’re not buying something that’s just gold plated.
Is gold a good investment right now? Here’s what pros say
Whether you buy a physical bar or invest in gold some other way, like through an ETF, what do pros say about whether buying gold is actually a good investment? Long story short, it depends.
Broadly speaking, Genesis Gold Group CEO Jonathan Rose says people often use gold as a hedge against inflation or a potential recession. “The price of precious metals will always fluctuate and we try to avoid speculating about the short term price of gold, with our eyes set on the medium and long term,” says Rose. That’s why the saying goes, ‘You don’t wait to buy gold. You buy gold and you wait.’”
Joe Favorito, a certified financial planner at Landmark Wealth Management, says, “looking at a chart of gold and the current inflationary environment, it would appear that gold may very well be a good buy at the moment.” That said, you’ll want to make sure you’re buying from a reputable company. “Make sure that if you’re buying things like gold coins, you have a gold purity in the content that is in excess of 90%,” says Favorito.
While it’s possible that gold may offer some protection against inflation, some pros say don’t bet too much on it. “You would’ve lost out on a lot of returns if you had moved to gold instead of the stock market years ago,” says Struthers.
Another thing to consider is that having a small amount of gold for diversification can be good, explains Struthers, adding that you should understand the downsides and opportunity costs. “Most people buying at Costco are probably not doing it for diversification, they’re doing it for comfort cash. They’re afraid of hyperinflation, political instability or economic collapse and like with emergency funds, there’s nothing wrong with that, as long as it’s within moderation and you know what you’re giving up,” says Struthers.
Rather than buying physical gold, the better and more simple option might be to buy an ETF that owns physical gold. “The fund will rise or fall with the price of gold and you avoid the enormous transaction costs of owning physical bullion,” says James Royal, principal writer on investing at Bankrate. “If you buy physical gold bullion, you’re going to get clipped coming and going,” Royal says. “Dealers will sell it to you above spot price, while they’ll buy it from you only below spot price, building in their own significant profit margin. You could easily lose 10% on either side of the transaction, meaning you’re already losing as soon as you buy gold.”
Another thing to keep in mind when buying gold bullion is the downside of owning physical gold. There can be costs to store it, insure it and transport it. “Transaction and storage costs are high. I can buy and sell a basket of S&P 500 stocks for almost no cost, but not for physical gold. ETFs like GLD can make it easy to buy and hold gold, but because you don’t have physical possession of it, it loses value for some people, who like the comfort of having it under the mattress,” says Struthers.
