Costco is selling gold. Is it worth buying?

Costco, the bulk-shopping powerhouse renowned for its competitive pricing on household staples and groceries, has recently broadened its horizons in a surprising way. A recent earnings call revealed that the retail giant has started offering gold bars for sale on their website.

While the sale of precious metals may seem like a departure from Costco’s traditional inventory, the move has proven to be a shrewd one as the 1-ounce bars continually sell out within hours of being listed online. And while these gold bars are not priced at the steep discounts that shoppers have come to expect from Costco’s products, they are being sold at the prevailing market price. So investors seeking a refuge from inflation are seeing an opportunity. As of this writing, multiple media outlets are reporting that the 1-ounce bars retail for around $2,000 each, with a limit of two per customer.

In uncertain economic climates characterized by market volatility and fears of recession, it's not uncommon to see a surge in the demand for precious metals. Gold has long been considered a "safe investment" and a method to diversify one's investment portfolio. The tangible nature of gold also appeals to those seeking a semblance of security, especially when high-interest rates and a shaky banking industry are causing widespread concern.

But the real question investors should ask is whether buying gold from Costco – or anywhere – is truly "worth it." While the allure of gold is undeniable, the diversification it offers is minimal – especially in quantities as small as the 2-ounce limit imposed by Costco. What's more, the perceived security of any precious metal can be misleading. Gold's price is subject to significant fluctuations and historically has not proven to be the inflationary hedge investors expect. When inflation rates exceed the returns on gold, the investment might lead to missed opportunities for safeguarding and growing one’s principal.

The historical data speaks for itself. As of December 2022, gold’s 10-year return stood at a modest 0.92%, whereas the U.S. stock market boasted a 10-year return of 12.44%. With inflation still high and interest rates continuing to rise, one could argue that an investment in a short-term Treasury bill would be a better way to hedge against inflation while yielding little to no risk – in contrast to precious metals with a risk profile similar to the very volatility investors often aim to avoid.

Costco is no stranger to solid business ideas, and this offering has certainly gotten the company plenty of press. But prudent investors should think twice before adding gold bars to their shopping carts alongside bulk toilet paper and pantry items. It’s important to consult a financial adviser to determine if gold aligns with your broader financial strategy.

For those without a financial adviser, our team at CapWealth is equipped to guide you. As experts in several asset classes, including precious metals, we can assess whether gold is a suitable component of your financial blueprint. Keep in mind that investment decisions should always consider the full range of your financial goals as well as the current market landscape.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com.