Collecting Friends: Buying Gold

Buying Gold

Steve: Earlier this year there was a lot written about Costco selling gold bars. Debbie Carlson’s article in the January 8, 2024, Wall Street Journal had a comment from a retired gentleman who buys gold on occasion as an investment. He typically bought from his local precious metal dealer, but decided to give Costco a try, lured by its free shipping and because of his affinity for the Costco brand. Gold bar offerings on Costco’s website typically sell out within a few hours, even with a limit of two bars per member, and the company sold over $100 million in gold during one quarter of 2023. 

The bars are the same type of gold bars that are available elsewhere and the typical product offered is a 1-ounce bullion bar produced by Swiss-based PAMP or from South Africa’s Rand Refinery. 

Unlike numismatic dealers, Costco doesn’t make the current spot price of gold easy to find, and typically offers its gold product at 2.5 percent over the spot price of gold. With an executive membership that gives two percent back and a rewards credit card, one can essentially buy a couple of ounces of gold at spot price from Costco. 

Buying through Costco provides buyers with trust, encouraging new buyers, who will perhaps buy from numismatic dealers in the future. Further, as Costco is a seller, but not a buyer of gold, if a Costco-buyer wants to sell their gold bar, they will likely turn to a traditional numismatic dealer. On the other hand, in some cases – as with the investor who shared his story with the Wall Street Journal – the business that comes from buying gold with Costco comes at the expense of a traditional numismatic dealer. 

ANA-member and dealer Mike Fuljenz, President of Universal Coin & Bullion in Beaumont, Texas, was quoted in the WSJ article. He recalled a recent hurricane that disrupted banking and other services in his town. He sold small gold pieces to a local dealer for cash, saying, “This is kind of the reason why people like physical gold.” 

Dennis, I know you love the $1.50 hot dogs at Costco. Would you buy bullion from there, too? What do you think about mainstream retailers entering the numismatic realm? 

Image: Nestled under the Sports & Fitness category on Costco’s website is its 1-ounce gold PAMP bar.

Dennis: These days I’m more of a Sam’s Club hot-dog-combo guy. Three or four of those (with a Diet Coke), and you got yourself a decent lunch! (Don’t tell my doctor I said that.) But Costco is good, too.

This whole scenario sounds like an absurdist riddle: “How is a gold bar like a hot dog?” Answer: They’re both loss leaders. Costco hot dogs certainly are—everyone knows they’re priced deliberately low in order to entice shoppers into the store. Is the gold just a flashy and expensive variation on the loss-leader strategy? All of the analysis I’ve read about the program suggests that Costco’s either running a very tight margin (which is the case with all bullion dealers these days) or even taking a loss on some of its gold sales. I’m not in Costco’s accounting department, so I don’t see their big picture. But as a gold consumer: Yes, I’d be happy to buy 24-karat gold from a trusted seller at such a low margin, especially with cash back!

I like the idea of mainstream retailers getting into the numismatic market. I’m not a coin dealer myself, and I know some of my dealer friends disagree for various reasons. For me, the appeal is in reach and frequency—“reach” being the number of people exposed to a sales opportunity, and “frequency” how often it enters their awareness. The product, in this case, isn’t just a specific gold piece; I see coin-collecting itself as what’s being promoted. One-ounce gold bars aren’t the same as Buffalo nickels or Morgan dollars, but they’re numismatic, and who knows—Costco might lead hundreds (or thousands) of buyers deeper into “classic” coin collecting. Think of the hobby being promoted to 130 million big-box club members! (What if Costco included an ANA flyer with each purchase?) Bottom line: it’s funny to think of America’s third-largest retailer selling both hot dogs and gold bullion, but it might bring an oddball, unexpected, and welcome boost to numismatics.

Be on the lookout for another installment of Collecting Friends next month or subscribe here and never miss a post! In the meantime, explore beautiful coins from the ANA's Edward C. Rochette Money Museum Virtual Exhibits.

About the Collecting Friends Blog

Hello! And welcome to the ANA’s blog series, “Collecting Friends.”

We decided to approach this much like a conversation between friends. One of us starts with a topic, then the other responds. Simple as that. Along those lines, we’ll keep the tone conversational as much as possible. 

We both write about coins professionally, and will keep our relative style guides in our writing. For Dennis, Publisher at Whitman Publishing, that means capitalizing “Proof” and italicizing Red Book and never saying anything bad about Ken Bressett, who’s awesome anyway. 

For Steve, who’s written with Coin World for 15 years, it means Winged Liberty Head dime instead of “Mercury” dime, and similar nuances and oddities. And, it means writing A Guide Book of United States Coins (better known as the “Red Book”). 

Both of us started collecting when we were little, introduced to coins by a chance encounter with an old coin that sparked our curiosity. One of Steve’s interests is coin valuation, and he gravitates towards the intersection of art and coins. Dennis enjoys medals and world coins, and studying modern U.S. coins in the context of older series, what came before.

We met in 2012 at the American Numismatic Association World’s Fair of Money in Philadelphia at an event hosted by the Austrian Mint where there was both a Ben Franklin and a Betsy Ross impersonator. We’ve become great friends in the past decade. We even were appointed together to sit on the Citizens Coinage Advisory Committee starting in 2016, but Steve resigned soon after he was appointed to accept a full-time job at the Treasury Department while Dennis was re-appointed in 2020.

We taught a course together on numismatic publishing and writing a few years ago at the Summer Seminar, and while life has gotten in the way of us teaching another class, we jumped at our friend Caleb’s suggestion that we write a column. We hope you enjoy it! 

About the American Numismatic Association

The American Numismatic Association is a nonprofit organization dedicated to educating and encouraging people to study and collect coins and related items. The Association serves collectors, the general public, and academic communities with an interest in numismatics.

The ANA helps all people discover and explore the world of money through its vast array of educational programs including its museum, library, publications, conventions and numismatic seminars.