Gold Bars in the Shopping Cart

The Wall Street Journal comments on Gold Bars in the Costco Shopping Cart.

Costco, which started offering gold bars last year online and in a few stores, has been selling out within hours. Consumers rated gold as a better investment than stocks and mutual funds in 2023 for the first time in a decade, according to a Gallup poll. The price has been hitting record highs.

Gold buyers, especially those on the younger side, say it is a hedge against catastrophe. Even people who aren’t building bunkers and predicting doomsday are increasingly preparing for worst-case scenarios. Natural disasters, wars in Ukraine and the Middle East and the Covid-19 pandemic are fresh in the minds of many. There is also fear of financial calamity.

Some millennial investors said they don’t trust the financial system, especially after a series of bank failures last year. Searching for a safe store of value some turned to gold—and Costco.

The warehouse retailer said it sold $100 million in gold bars in 2023. It later added silver coins to its inventory. Precious metal sales helped drive 18% year-over-year growth in e-commerce sales during its most recent quarter, which ended in February, Costco said.

Millennial gold bugs

Compared with older generations, millennials have a more optimistic outlook on the benefits of gold, as well as the ease of buying and selling it, according to research by financial-services company State Street. The average millennial allocates 17% of their investments to gold, including exchange-traded funds, while Gen X and baby boomers invest 10% of their portfolio in the metal.

The Journal commented on Costco gold sales in January. Here are a few snips.

Members of Facebook groups and Reddit message boards dedicated to Costco and gold post alerts when the gold bars are available. Those who miss out on the fast-moving items often grumble, while those who made purchases often report their success, sometimes including pictures and prices paid.

Because gold prices are volatile, listed prices will vary, and Costco’s price may be above or below the day’s spot gold price. On Dec. 14, for instance, a 1-ounce PAMP 2024 Azure Dragon minted gold bar was available on Costco’s site for $2,079.99, about 2.5% over spot gold prices that day. It was gone in less than two hours.

Costco shoppers also get free shipping and don’t pay credit-card-processing fees. Online gold dealers charge for secure shipping and pass on the credit-card-processing fees to customers, which may add at least 3% to the final cost. On a coin costing $2,079.99, that is an extra $62.40.

Five Reasons to Buy at Costco

1. Costco is trusted
2. Swiss PAMP bars are trusted by dealers and consumers alike
3. Small markups, on occasion under spot
4. Free shipping
5. No credit card fees

Regarding points one and two:

Peter Thomas, chairman of the offshore development for Ausecure, a Chicago-based precious-metals wholesaler and retailer, thinks Costco’s decision to offer PAMP bars in particular is smart, given the high quality of the product. PAMP’s flagship Lady Fortuna bar has a proprietary QR code on the card that identifies the piece that is also embedded in the bar itself to prevent counterfeiting. The QR code includes when the bar was poured and other identifying information. 

Thomas, a longtime gold dealer says that he would feel comfortable buying a PAMP bar from a noncustomer.

Gold Monthly Cup-And-Handle

Gold chart courtesy of StockCharts.com annotations by Mish

I have been watching that chart for years and have commented on it many times.

Cup-and-handle formations are a very bullish, but quite unreliable, pattern. In this case, the pattern has started to play out in the expected direction.

In 2020, I would not have guessed that millennials buying at Costco would be fueling demand. But here we are.

Sign of a Top?

Some might be wondering if millennials buying at Costco is a sign of a top.

Instead, I suggest we are barely in the recognition phase that the Fed does not have things under control.

WSJ Gets the Fundamentals Wrong

Gold historically does better when the economy does worse. But gold futures rose 13% in 2023, even as the economy kept growing and inflation cooled. Bank stocks, meanwhile, fell almost 5%.

That’s an inaccurate description of when gold does best and worst.

Gold does best when trust in central banks is the lowest. Gold does worst in periods of disinflation when other assets are generally booming.

Contrary to widespread myth, the US dollar is not a factor except in the very short term.

Gold vs the US Dollar

(Click on image to enlarge)

Charts courtesy of Stockcharts.Com, annotations by Mish

With the US dollar Index at 90, gold has been at $380, $1000, $1130, and $1900.

And there are times when gold and the dollar rise together.

Gold vs Faith in Central Banks

(Click on image to enlarge)

Chart courtesy of TradingEconomics, annotations by Mish

Gold is best viewed as a hedge against declining faith in central banks.

March 4, 2024: The Atlanta Fed on “Pent-Up Exuberance” and Threat of More Inflation

February 29, 2024: A Severe Eurozone Recession and Debt Crisis is On the Way

February 22, 2024: Within 10 Years, Interest and Medicare Will Each Cost $1.6 Trillion a Year

September 7, 2023: Debt to GDP Alarm Bells Ring, Neither Party Will Solve This

“Neither party will fix the deficits. Neither party will do anything about mounting debt. No one will do anything about anything because the political system is totally broken.” Mish

That’s the message of gold. Bitcoin advocates would say Bitcoin as well.

Looking for another place to buy gold from a reputable dearer?

Please give Bullion Star a look. For proper disclosure, I do have an affiliate relationship. It does not affect the price you pay but it helps me a tiny bit.

The above link contains my affiliate code.

At Bullion Star, you can buy grams of gold and silver as well as ounces.

If you are interested in trading gold or energy futures, you might wish to give Phil Flynn, @EnergyPhilFlynn at the Pricegroup a call. That’s a courtesy link. I have no formal relationship, but I have known Phil for a long time.

Would You Like to Earn Interest, Paid in Gold, Not Fiat Currency?

For those interested in earning interest on gold, paid in gold, please see Would You Like to Earn Interest, Paid in Gold, Not Fiat Currency?

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