With a Costco membership, you can purchase a rotisserie chicken, a half gallon jar of mayonnaise and a bar of real gold all in one trip.
The popular warehouse club has made it easier than ever to snap up this precious metal, which now has a market value of more than $3,200 an ounce – an increase of nearly 60% since the start of 2024. The product is in such high demand that Costco has restricted purchases to two units per day.
In 2024, gold had a return of 27% compared to the S&P 500’s 24%.
President Donald Trump’s tariff policies have fueled market uncertainty in recent months, leading investors to buy gold because it’s perceived as a safe-haven asset, said Campbell Harvey, a finance professor at Duke University.
“Gold has a very good reputation and it’s got a long history,” Harvey said. “Gold has got a much longer history than stocks or bonds. It goes back millennia.”
Many people are also fearful of another surge in inflation following the high rates we saw during the pandemic, Harvey said.
One investor, who spoke to Marketplace under the condition of anonymity, said he began purchasing gold from Costco back in 2023 as a hedge against inflation and as a way to diversify his equity portfolio. One major perk: he gets 2% cashback as a Costco executive member and another 2% by using his credit card for a total of 4%. And unlike many bullion dealers, Costco doesn’t charge you a credit card fee.
The investor told us he stores his gold at the bank, but some buyers conceal it at home.
Although gold prices dipped 3% following Trump’s 90-day trade deal with China, they have started to rebound amid a weakening U.S. dollar and worse-than-expected economic data. But while purchasing gold sounds appealing, investors should be cautious since the value of gold can fluctuate a lot. And if you’re buying physical gold, bullion dealers won’t pay the fair market value when you decide to sell it.
Why gold prices are rising
Market uncertainty and inflation fears aren’t the only factors that have boosted gold’s value. The price of gold has been on a tear because supply has failed to accommodate demand. Worldwide gold mine production stood at an estimated 3,300 tons in 2024, just a smidge above total gold production in 2023. “So this makes gold very sensitive to changes in demand,” Harvey said.
It’s also become easier than ever for investors to now hold gold in their portfolios. Gold has been “financialized,” which means you can buy shares of gold exchange-traded funds, Harvey said. That makes owning gold easier for both individual investors and institutional investors who now don’t have to vault their bullion, he explained.
Another factor: China has increased its gold reserves in recent years as it reduces its reliance on the U.S. dollar, Harvey said.
And gold is attractive because it isn’t controlled by any government – similar to Bitcoin’s appeal, Harvey said.
Why buying gold is risky
While gold is perceived as safe, prices are actually very volatile.
“My research shows that it is a great hedge over the extreme long term, like centuries or millennia, but because it’s so volatile, it is unreliable in the short term. So beware,” Harvey said.
Although gold had a good 2024, the precious metal only had an average annual return of 4.4% from 1980 to 2023. The S&P typically has an average annual return of 10% over long periods of time, said James Royal, an investment analyst at Bankrate.
And when you’re buying physical gold, you’re typically buying it at a markup, which might be up to 7% more than its market value, Royal said.
Costco’s gold prices might be 3% above the spot value, which Royal says is “relatively fair.”
“It’s about as good a price as you’re going to get anywhere in terms of the markup,” Royal said.
But when you try to sell it, the dealer might pay you 10% less than the market price because they have to build in their own profit margin, Royal said.
That means you will not get the fair market value of your purchase, Royal said.
“Buying physical gold is the absolute worst way to invest in gold,” Royal said.
If you do want to buy gold, ETFs are an easier and safer investment since the investment firm stores the gold and insures it, Royal said.
You might have to pay 0.4% or 0.5% of your investment per year, but you’re able to buy and sell it at the fair market value, he explained.
But in the event of a global financial meltdown, the ability to have physical gold in your hands is tempting. There’s a reason why doomsday preppers gravitate toward it.