October 31, 2023 • 11 mins
The news media has been covering the story that the wholesale store Costco has been selling one-ounce gold bars. Although it's obviously a strange story, these news articles have missed some of the major points about the story. In this episode, Everett recaps what's going on with the Costco gold bars and sets the record straight about what everyone else is overlooking about this odd story.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
This is Breaking the Dollar.
(00:05):
The podcast that dismantles some of the biggest misconceptions about money.
Hello everyone, I'm Everett Milman and welcome back to another episode of Breaking the Dollar.
(00:39):
Today we're going to cover a story that has been all over the mainstream news.
But I think most of the coverage thus far has missed the mark on what's actually important
about this story.
So what I'm talking about is the fact that around a month ago at the time of recording
news broke that the discount wholesale store Costco has been selling gold bars.
(01:05):
It's gotten the media's attention mainly as a curiosity and as far as I know it's never
happened before.
And to be fair, that is a really strange place to see gold bullion being sold.
Outside of the normal setting of a bullion dealer or your local coin shop, you do sometimes
see gold bars for sale at, for instance, flea markets and pawn shops and even at gun shows.
(01:30):
But at a Costco, that's definitely unheard of at least from my experience.
So from that standpoint, it's kind of obvious why this made the news.
But some of the most important points about it are being overlooked.
And so that's what I'm going to tackle in this episode.
So first of all, let's talk about the kinds of gold bars that are being sold.
(01:52):
Costco is selling PAMP Suisse one ounce gold bars, which are made by the famous gold refinery
in Switzerland.
These are the prototypical name brand gold bars.
They're a highly trusted product, probably the most trusted gold product in the precious
metals industry.
So that part is good.
The products themselves are legit.
(02:13):
And also from what I've seen, Costco is selling them at reasonable prices.
So that's another good sign.
But there are a couple of caveats that we should discuss.
There are restrictions and limitations on Costco's sales that complicate this story.
First of all, the bars are only available for sale on the Costco website.
(02:34):
You can't walk into the store itself and buy them off the shelf.
That probably means that Costco is sort of drop shipping the bars.
Or in other words, they're having a third-party supplier actually fulfill all the orders
it takes.
I can't really speculate on who that supplier may be.
But let's just say there's very little chance that these bars are sitting in some warehouse
(02:57):
that is actually owned and operated by Costco.
They're also limiting Costco members to only purchasing two gold bars per member.
This is likely being done to avoid someone buying up their entire inventory like a scalper
who's planning to resell the bars at higher prices.
Because the bars have routinely been selling out on the Costco website in a matter of just
(03:20):
a few hours.
But it's worth pointing out that at a professional gold bullion dealer like Gainesville Coins,
you can order virtually as many gold bars or as many PAMP gold bars as you please.
There are no restrictions.
Beyond that there are a few other red flags or at least drawbacks to address here.
First and foremost, Costco will not accept returns of the bars.
(03:43):
I imagine that's because the price of gold fluctuates up and down, so they could lose
some money if the gold price drops and there's a wave of returns.
That's concerning to me because every single legitimate gold dealer will always, always,
buy back any item that they sell.
Secondly, it's highly unlikely that any employee or customer service representative for Costco
(04:10):
can really explain to someone what these bars are.
What do they know about PAMP Suisse and the gold refining industry?
What can they explain about the value of gold or its usefulness as an investment?
Basically Costco employees are not experts in gold, nor would I expect them to be.
(04:31):
But do you really want to buy gold from a place that doesn't actually understand what
it is they're selling?
I mean, maybe. If you're well informed about the gold market already and you know what
you're buying, I suppose it doesn't really matter if Costco has any idea what they are.
But I think for the general public that's probably not the best venue to buy gold if
(04:52):
you have questions to ask.
So that's the broad overview of the situation with the Costco gold bars.
Now I want to talk about the way the story has been covered, and it has been covered wide
and far.
I've probably come across two dozen different headlines about it over the past few weeks.
And I myself have fielded several calls from reporters who are asking me about it, trying
(05:15):
to explain what's going on here.
Is Costco really selling these?
What are they?
Initially I heard from a program on CBS that didn't end up going anywhere, but I also
got a call from a journalist at the Daily Mail in the UK who very diligently asked me
about how the bullion market normally works in order to put the whole Costco thing into
(05:36):
context.
That article actually got published and it included some quotes from me.
The main idea I want to get across is that virtually every single article written on
this topic covered it with a negative slant towards gold.
The Costco bit was an oddity for them to lead with, but the rest of the articles would invariably
(05:57):
use it as an opportunity to make disparaging comments about buying or owning gold.
The articles would say things like, you're better off buying stock in the company of
Costco than buying their gold bars.
Or they would quote some investing expert who would say that gold is a bad investment.
It's a pet rock that offers no yield, all the typical anti-gold talking points.
(06:20):
And look, I personally don't recommend buying your gold from Costco.
A bullion dealer is undoubtedly a better option, especially if you want to gain a better understanding
of the gold market.
But it sort of irks me that the news story just became a jumping off point for these
media outlets to amplify the message that buying gold is a dumb idea.
(06:42):
Now, don't get me wrong, it's not surprising. That has literally always been the case for
as long as I've worked in this industry.
Even the financial news media, which specifically focuses on investing, tends to have a deep
seated negative bias against gold.
They talk about it dismissively almost without fail.
(07:04):
Like if the gold price is doing anything besides going up, if it's falling or if it's moving
sideways, then they're ready to write it off as a dying asset class.
And this is when they bother talking about gold at all in the first place.
The precious metals as a whole get relatively little coverage as it is.
And it's no wonder that today, only a fraction of 1% of investment portfolios have any exposure
(07:29):
to gold.
The last I saw it was about 0.5% of portfolios.
I do believe that statistic only applies to the United States because, worldwide, there's
a much greater affinity for gold than there is here in the US.
This is particularly true in countries where there is still a strong memory of bouts of
(07:50):
high inflation, currency collapses, or economic crises.
In these places, they use gold as a vehicle for wealth preservation, whereas here in the
States, we're mostly just obsessed with getting rich as quickly as possible.
So the uniformly negative reporting is one aspect of this that misses the mark.
(08:11):
But I think there are two important points about the Costco gold bars that are being
completely overlooked.
One is that this obviously indicates that gold is sort of re-entering the public consciousness.
Gold is having a moment, so to speak.
I'm not sure how anyone hears about this story and doesn't see that gold bullion, not gold
jewelry or gold artwork or something gimmicky, but investment-grade gold bullion is
(08:37):
suddenly for sale at this very mainstream venue.
To me, that part is undeniable.
Gold is again back in the public consciousness.
The second point is about, well, why Costco?
Why at Costco of all places?
That part took me a while to wrap my head around because nobody who I discussed it with
had a very compelling explanation.
(09:00):
And I think it comes down to the idea that Costco is a wholesale store.
They sell items in bulk.
Ironically, you can't actually buy the gold bars in bulk, but I digress.
The point is that Costco sells bulk items.
And if you think about it, gold is a bulk form of money.
It's concentrated value.
(09:22):
If you've never held a one ounce gold bar before, you'll probably be surprised to find
how small its dimensions are, and yet it's still rather heavy because gold is so dense.
But the bar itself, a one ounce bar, is like the size of a small club cracker.
It's smaller than a credit card in terms of its length and width.
A lot smaller, actually.
(09:44):
So given that these little one ounce bars are worth about $2,000 each, I would say that's
a bulk form of storing your money.
It's really the only angle or interpretation that makes sense to me about why gold bars
would fit in with Costco's brand or its business model.
And that's not something I've seen suggested anywhere else so far.
(10:07):
So that's why I think it's a unique take on the story.
So that wraps up our discussion of the Costco gold bars.
This is normally the part of the episode where I would try to answer a question from
one of you, the listeners.
But there really weren't any particularly interesting ones this time around.
So I'll just let you guys know, remember, you can always post a question for me on the
(10:29):
Gainesville Coins blog, or on our Twitter account.
The tag is @GainesvilleCoin (singular).
Or on Instagram threads. You can reach out on any of those platforms, send a question,
give us any feedback about the podcast, and I will hopefully be able to answer your question
on the next episode.
Thank you so much for listening to this episode of Breaking the Dollar.
(10:53):
If you enjoyed the show, consider leaving us a review.
It helps other people find the podcast.
Breaking the Dollar is brought to you by Gainesville Coins, one of North America's largest gold
and silver bullion dealers.
Visit GainesvilleCoins.com to shop for gold, silver, and platinum at the lowest prices
in the industry.
This is Breaking the Dollar.
(00:05):
The podcast that dismantles some of the biggest misconceptions about money.
Hello everyone, I'm Everett Milman and welcome back to another episode of Breaking the Dollar.
(00:39):
Today we're going to cover a story that has been all over the mainstream news.
But I think most of the coverage thus far has missed the mark on what's actually important
about this story.
So what I'm talking about is the fact that around a month ago at the time of recording
news broke that the discount wholesale store Costco has been selling gold bars.
(01:05):
It's gotten the media's attention mainly as a curiosity and as far as I know it's never
happened before.
And to be fair, that is a really strange place to see gold bullion being sold.
Outside of the normal setting of a bullion dealer or your local coin shop, you do sometimes
see gold bars for sale at, for instance, flea markets and pawn shops and even at gun shows.
(01:30):
But at a Costco, that's definitely unheard of at least from my experience.
So from that standpoint, it's kind of obvious why this made the news.
But some of the most important points about it are being overlooked.
And so that's what I'm going to tackle in this episode.
So first of all, let's talk about the kinds of gold bars that are being sold.
(01:52):
Costco is selling PAMP Suisse one ounce gold bars, which are made by the famous gold refinery
in Switzerland.
These are the prototypical name brand gold bars.
They're a highly trusted product, probably the most trusted gold product in the precious
metals industry.
So that part is good.
The products themselves are legit.
(02:13):
And also from what I've seen, Costco is selling them at reasonable prices.
So that's another good sign.
But there are a couple of caveats that we should discuss.
There are restrictions and limitations on Costco's sales that complicate this story.
First of all, the bars are only available for sale on the Costco website.
(02:34):
You can't walk into the store itself and buy them off the shelf.
That probably means that Costco is sort of drop shipping the bars.
Or in other words, they're having a third-party supplier actually fulfill all the orders
it takes.
I can't really speculate on who that supplier may be.
But let's just say there's very little chance that these bars are sitting in some warehouse
(02:57):
that is actually owned and operated by Costco.
They're also limiting Costco members to only purchasing two gold bars per member.
This is likely being done to avoid someone buying up their entire inventory like a scalper
who's planning to resell the bars at higher prices.
Because the bars have routinely been selling out on the Costco website in a matter of just
(03:20):
a few hours.
But it's worth pointing out that at a professional gold bullion dealer like Gainesville Coins,
you can order virtually as many gold bars or as many PAMP gold bars as you please.
There are no restrictions.
Beyond that there are a few other red flags or at least drawbacks to address here.
First and foremost, Costco will not accept returns of the bars.
(03:43):
I imagine that's because the price of gold fluctuates up and down, so they could lose
some money if the gold price drops and there's a wave of returns.
That's concerning to me because every single legitimate gold dealer will always, always,
buy back any item that they sell.
Secondly, it's highly unlikely that any employee or customer service representative for Costco
(04:10):
can really explain to someone what these bars are.
What do they know about PAMP Suisse and the gold refining industry?
What can they explain about the value of gold or its usefulness as an investment?
Basically Costco employees are not experts in gold, nor would I expect them to be.
(04:31):
But do you really want to buy gold from a place that doesn't actually understand what
it is they're selling?
I mean, maybe. If you're well informed about the gold market already and you know what
you're buying, I suppose it doesn't really matter if Costco has any idea what they are.
But I think for the general public that's probably not the best venue to buy gold if
(04:52):
you have questions to ask.
So that's the broad overview of the situation with the Costco gold bars.
Now I want to talk about the way the story has been covered, and it has been covered wide
and far.
I've probably come across two dozen different headlines about it over the past few weeks.
And I myself have fielded several calls from reporters who are asking me about it, trying
(05:15):
to explain what's going on here.
Is Costco really selling these?
What are they?
Initially I heard from a program on CBS that didn't end up going anywhere, but I also
got a call from a journalist at the Daily Mail in the UK who very diligently asked me
about how the bullion market normally works in order to put the whole Costco thing into
(05:36):
context.
That article actually got published and it included some quotes from me.
The main idea I want to get across is that virtually every single article written on
this topic covered it with a negative slant towards gold.
The Costco bit was an oddity for them to lead with, but the rest of the articles would invariably
(05:57):
use it as an opportunity to make disparaging comments about buying or owning gold.
The articles would say things like, you're better off buying stock in the company of
Costco than buying their gold bars.
Or they would quote some investing expert who would say that gold is a bad investment.
It's a pet rock that offers no yield, all the typical anti-gold talking points.
(06:20):
And look, I personally don't recommend buying your gold from Costco.
A bullion dealer is undoubtedly a better option, especially if you want to gain a better understanding
of the gold market.
But it sort of irks me that the news story just became a jumping off point for these
media outlets to amplify the message that buying gold is a dumb idea.
(06:42):
Now, don't get me wrong, it's not surprising. That has literally always been the case for
as long as I've worked in this industry.
Even the financial news media, which specifically focuses on investing, tends to have a deep
seated negative bias against gold.
They talk about it dismissively almost without fail.
(07:04):
Like if the gold price is doing anything besides going up, if it's falling or if it's moving
sideways, then they're ready to write it off as a dying asset class.
And this is when they bother talking about gold at all in the first place.
The precious metals as a whole get relatively little coverage as it is.
And it's no wonder that today, only a fraction of 1% of investment portfolios have any exposure
(07:29):
to gold.
The last I saw it was about 0.5% of portfolios.
I do believe that statistic only applies to the United States because, worldwide, there's
a much greater affinity for gold than there is here in the US.
This is particularly true in countries where there is still a strong memory of bouts of
(07:50):
high inflation, currency collapses, or economic crises.
In these places, they use gold as a vehicle for wealth preservation, whereas here in the
States, we're mostly just obsessed with getting rich as quickly as possible.
So the uniformly negative reporting is one aspect of this that misses the mark.
(08:11):
But I think there are two important points about the Costco gold bars that are being
completely overlooked.
One is that this obviously indicates that gold is sort of re-entering the public consciousness.
Gold is having a moment, so to speak.
I'm not sure how anyone hears about this story and doesn't see that gold bullion, not gold
jewelry or gold artwork or something gimmicky, but investment-grade gold bullion is
(08:37):
suddenly for sale at this very mainstream venue.
To me, that part is undeniable.
Gold is again back in the public consciousness.
The second point is about, well, why Costco?
Why at Costco of all places?
That part took me a while to wrap my head around because nobody who I discussed it with
had a very compelling explanation.
(09:00):
And I think it comes down to the idea that Costco is a wholesale store.
They sell items in bulk.
Ironically, you can't actually buy the gold bars in bulk, but I digress.
The point is that Costco sells bulk items.
And if you think about it, gold is a bulk form of money.
It's concentrated value.
(09:22):
If you've never held a one ounce gold bar before, you'll probably be surprised to find
how small its dimensions are, and yet it's still rather heavy because gold is so dense.
But the bar itself, a one ounce bar, is like the size of a small club cracker.
It's smaller than a credit card in terms of its length and width.
A lot smaller, actually.
(09:44):
So given that these little one ounce bars are worth about $2,000 each, I would say that's
a bulk form of storing your money.
It's really the only angle or interpretation that makes sense to me about why gold bars
would fit in with Costco's brand or its business model.
And that's not something I've seen suggested anywhere else so far.
(10:07):
So that's why I think it's a unique take on the story.
So that wraps up our discussion of the Costco gold bars.
This is normally the part of the episode where I would try to answer a question from
one of you, the listeners.
But there really weren't any particularly interesting ones this time around.
So I'll just let you guys know, remember, you can always post a question for me on the
(10:29):
Gainesville Coins blog, or on our Twitter account.
The tag is @GainesvilleCoin (singular).
Or on Instagram threads. You can reach out on any of those platforms, send a question,
give us any feedback about the podcast, and I will hopefully be able to answer your question
on the next episode.
Thank you so much for listening to this episode of Breaking the Dollar.
(10:53):
If you enjoyed the show, consider leaving us a review.
It helps other people find the podcast.
Breaking the Dollar is brought to you by Gainesville Coins, one of North America's largest gold
and silver bullion dealers.
Visit GainesvilleCoins.com to shop for gold, silver, and platinum at the lowest prices
in the industry.
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