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This is Breaking the Dollar.

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The podcast that dismantles some of the biggest misconceptions about money.

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Hello everyone, I'm Everett Milman and welcome back to another episode of Breaking the Dollar.

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Today we're going to cover a story that has been all over the mainstream news.

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But I think most of the coverage thus far has missed the mark on what's actually important

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about this story. So what I'm talking about is the fact that around a month ago at the time of recording

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news broke that the discount wholesale store Costco has been selling gold bars.

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It's gotten the media's attention mainly as a curiosity and as far as I know it's never

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happened before.

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And to be fair, that is a really strange place to see gold bullion being sold.

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Outside of the normal setting of a bullion dealer or your local coin shop, you do sometimes

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see gold bars for sale at, for instance, flea markets and pawn shops and even at gun shows.

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But at a Costco, that's definitely unheard of at least from my experience.

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So from that standpoint, it's kind of obvious why this made the news.

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But some of the most important points about it are being overlooked.

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And so that's what I'm going to tackle in this episode.

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So first of all, let's talk about the kinds of gold bars that are being sold.

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Costco is selling PAMP Suisse one ounce gold bars, which are made by the famous gold refinery

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in Switzerland.

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These are the prototypical name brand gold bars.

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They're a highly trusted product, probably the most trusted gold product in the precious

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metals industry. So that part is good.

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The products themselves are legit.

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And also from what I've seen, Costco is selling them at reasonable prices.

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So that's another good sign.

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But there are a couple of caveats that we should discuss.

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There are restrictions and limitations on Costco's sales that complicate this story.

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First of all, the bars are only available for sale on the Costco website.

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You can't walk into the store itself and buy them off the shelf.

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That probably means that Costco is sort of drop shipping the bars.

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Or in other words, they're having a third-party supplier actually fulfill all the orders

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it takes. I can't really speculate on who that supplier may be.

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But let's just say there's very little chance that these bars are sitting in some warehouse

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that is actually owned and operated by Costco.

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They're also limiting Costco members to only purchasing two gold bars per member.

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This is likely being done to avoid someone buying up their entire inventory like a scalper

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who's planning to resell the bars at higher prices.

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Because the bars have routinely been selling out on the Costco website in a matter of just

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a few hours. But it's worth pointing out that at a professional gold bullion dealer like Gainesville Coins,

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you can order virtually as many gold bars or as many PAMP gold bars as you please.

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There are no restrictions.

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Beyond that there are a few other red flags or at least drawbacks to address here.

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First and foremost, Costco will not accept returns of the bars.

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I imagine that's because the price of gold fluctuates up and down, so they could lose

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some money if the gold price drops and there's a wave of returns.

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That's concerning to me because every single legitimate gold dealer will always, always,

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buy back any item that they sell.

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Secondly, it's highly unlikely that any employee or customer service representative for Costco

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can really explain to someone what these bars are.

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What do they know about PAMP Suisse and the gold refining industry?

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What can they explain about the value of gold or its usefulness as an investment?

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Basically Costco employees are not experts in gold, nor would I expect them to be.

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But do you really want to buy gold from a place that doesn't actually understand what

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it is they're selling?

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I mean, maybe. If you're well informed about the gold market already and you know what

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you're buying, I suppose it doesn't really matter if Costco has any idea what they are.

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But I think for the general public that's probably not the best venue to buy gold if

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you have questions to ask.

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So that's the broad overview of the situation with the Costco gold bars.

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Now I want to talk about the way the story has been covered, and it has been covered wide

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and far. I've probably come across two dozen different headlines about it over the past few weeks.

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And I myself have fielded several calls from reporters who are asking me about it, trying

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to explain what's going on here.

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Is Costco really selling these? What are they?

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Initially I heard from a program on CBS that didn't end up going anywhere, but I also

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got a call from a journalist at the Daily Mail in the UK who very diligently asked me

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about how the bullion market normally works in order to put the whole Costco thing into

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context. That article actually got published and it included some quotes from me.

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The main idea I want to get across is that virtually every single article written on

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this topic covered it with a negative slant towards gold.

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The Costco bit was an oddity for them to lead with, but the rest of the articles would invariably

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use it as an opportunity to make disparaging comments about buying or owning gold.

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The articles would say things like, you're better off buying stock in the company of

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Costco than buying their gold bars.

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Or they would quote some investing expert who would say that gold is a bad investment.

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It's a pet rock that offers no yield, all the typical anti-gold talking points.

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And look, I personally don't recommend buying your gold from Costco.

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A bullion dealer is undoubtedly a better option, especially if you want to gain a better understanding

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of the gold market.

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But it sort of irks me that the news story just became a jumping off point for these

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media outlets to amplify the message that buying gold is a dumb idea.

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Now, don't get me wrong, it's not surprising. That has literally always been the case for

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as long as I've worked in this industry.

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Even the financial news media, which specifically focuses on investing, tends to have a deep

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seated negative bias against gold.

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They talk about it dismissively almost without fail.

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Like if the gold price is doing anything besides going up, if it's falling or if it's moving

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sideways, then they're ready to write it off as a dying asset class.

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And this is when they bother talking about gold at all in the first place.

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The precious metals as a whole get relatively little coverage as it is.

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And it's no wonder that today, only a fraction of 1% of investment portfolios have any exposure

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to gold.

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The last I saw it was about 0.5% of portfolios.

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I do believe that statistic only applies to the United States because, worldwide, there's

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a much greater affinity for gold than there is here in the US.

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This is particularly true in countries where there is still a strong memory of bouts of

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high inflation, currency collapses, or economic crises.

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In these places, they use gold as a vehicle for wealth preservation, whereas here in the

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States, we're mostly just obsessed with getting rich as quickly as possible.

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So the uniformly negative reporting is one aspect of this that misses the mark.

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But I think there are two important points about the Costco gold bars that are being

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completely overlooked.

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One is that this obviously indicates that gold is sort of re-entering the public consciousness.

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Gold is having a moment, so to speak.

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I'm not sure how anyone hears about this story and doesn't see that gold bullion, not gold

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jewelry or gold artwork or something gimmicky, but investment-grade gold bullion is

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suddenly for sale at this very mainstream venue.

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To me, that part is undeniable.

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Gold is again back in the public consciousness.

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The second point is about, well, why Costco?

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Why at Costco of all places?

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That part took me a while to wrap my head around because nobody who I discussed it with

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had a very compelling explanation.

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And I think it comes down to the idea that Costco is a wholesale store.

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They sell items in bulk.

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Ironically, you can't actually buy the gold bars in bulk, but I digress.

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The point is that Costco sells bulk items.

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And if you think about it, gold is a bulk form of money.

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It's concentrated value.

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If you've never held a one ounce gold bar before, you'll probably be surprised to find

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how small its dimensions are, and yet it's still rather heavy because gold is so dense.

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But the bar itself, a one ounce bar, is like the size of a small club cracker.

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It's smaller than a credit card in terms of its length and width.

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A lot smaller, actually.

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So given that these little one ounce bars are worth about $2,000 each, I would say that's

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a bulk form of storing your money.

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It's really the only angle or interpretation that makes sense to me about why gold bars

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would fit in with Costco's brand or its business model.

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And that's not something I've seen suggested anywhere else so far.

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So that's why I think it's a unique take on the story.

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So that wraps up our discussion of the Costco gold bars.

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This is normally the part of the episode where I would try to answer a question from

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one of you, the listeners.

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But there really weren't any particularly interesting ones this time around.

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So I'll just let you guys know, remember, you can always post a question for me on the

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Gainesville Coins blog, or on our Twitter account.

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The tag is @GainesvilleCoin (singular).

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Or on Instagram threads. You can reach out on any of those platforms, send a question,

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give us any feedback about the podcast, and I will hopefully be able to answer your question

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on the next episode.

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Thank you so much for listening to this episode of Breaking the Dollar.

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If you enjoyed the show, consider leaving us a review.

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It helps other people find the podcast.

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Breaking the Dollar is brought to you by Gainesville Coins, one of North America's largest gold

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and silver bullion dealers.

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Visit GainesvilleCoins.com to shop for gold, silver, and platinum at the lowest prices

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in the industry.