Here’s The Real Reason People Are Buying $200 Million In Gold From Costco Every Month
Here’s The Real Reason People Are Buying $200 Million In Gold From Costco Every Month
Costco has sold gold bars since the fall. They get more than the spot price of gold, but it’s still a good deal compared to most places you’ll purchase it.
It’s one of the more unusual things that Costco sells, perhaps, and it’s gotten a lot of attention this month because of a Wells Fargo report suggesting Costco sells $200,000,000 per month in gold bars. That’s a run rate of $2.4 billion per year in gold sales. (Costco gross sales totaled $242 billion in 2023, so this would produce about 1% of sales.)
Some people are buying gold from Costco instead of buying it from actor William Devane.
Others are stocking up on gold because they think the end times are near and somehow Gold will still have value when currency won’t. (Others think that bitcoin will be last standing, somehow, in a world that no longer has electricity.)
But many people have been buying gold for rewards, selling the gold, and pocketing the rewards for themselves. The problem is that they usually have to re-sell the gold for less than they bought it for – eating into their margins.
Here’s someone buying a Costco gold bar, they say, as an investment. They muse on whether they could write off the gold bar as an expense ‘as a content creator’ (they’re making a video of the gold bar!) but they realize that reduces their cost basis in the gold and they’d owe the taxes back when selling the bar – plus the IRS might not like it, and telling the TikTok world you’re doing tax fraud maybe heightens your audit risk a little bit?
@humphreytalks Buying Gold Bars from Costco
In this video he says he earned 1% cash back. It seems to me he’s doing this wrong. Here’s someone who sold their gold bars at 1% less than Costco’s price which means that even at 2% cash back they’re earning a spread on gold bar purchases.
Some people are buying and holding gold. Others are reselling. If they can reliably find someone to unload the gold on at a 1% discount to Costco pricing they’re winning. Your local ‘we buy gold!’ pawn shop is probably going to force a 10% haircut or more. Coin shops seem to be the best place (generally) to unload Costco gold.
Sometimes Costco is a rotating 5x category on rewards cards. There are cards that have done 3% back on wholesale clubs like Costco as a regular feature. And don’t forget that Costco Executive memberships earn an additional 2% back up to $1,000 in rewards.
Also, since we were talking about tax fraud, there are probably plenty of small businesses buying supplies and inventory from Costco and writing off the entire Costco purchase (including the Gold) against their business income, while converting the gold into personal cash, or just burying it in their back yard. I know of one career politician who left a treasure map for their heirs to find buried gold.
I have to think there’s another game that some people have played with this – Costco returns. Buy gold, and keep it if the price goes up, or bring it back to the store within 30 days with your receipt if the price falls?
There’s a lot of fraud, too, and not just 98% of transactions with loyalty programs originating in China. Every day someone who gives their name as Noah buys a DoorDash DashPass with a fake credit card, using one of my email addresses. The order fails. Apparently DoorDash lets them order food wiht that card, though, and also various goods. The DashPass subscription gets quickly paused. Did I mention that the fraudster asks for a refund of their delivery that they never actually paid for? So I think about fraud risk a lot.
Ultimately buying Costco gold bars isn’t like dollar coins, where the U.S. mint sold $1 coins at face value with free shipping and delivered them to your home. You paid with a credit card and just had the hassle of depositing the coins at the bank. You’re putting out a lot of money, the price of gold fluctuates, and sometimes reselling deals go bad. Sometimes you wind up dealing with a shady counterparty, too. So there’s a lot of risk for a small margin, but some folks have been taking advantage of that margin.
