Gold bars and silver coins are some of Costco’s hottest items this year, with the warehouse club selling through its supplies to the tune of $200 million a month.
Each new batch of gold bars sells out “within a few hours” of being released, Costco’s chief financial officer has said, for a small markup over the spot price.
Although some buyers have found success in using membership rewards and credit card incentives to flip gold for a quick profit, My Gold Advisor CEO Taylor Huff says that for most people, this short-term action is the wrong approach.
“Some people will just go buy gold from Costco, even though they don’t know why they’re buying it or what to do with it,” he told Business Insider.
Huff shared his top three tips that shoppers should remember when buying gold.
1: Gold is for saving, not quick profit
“You don’t buy physical gold to flip a profit. You buy physical gold to store wealth and to protect what you’ve earned,” Huff said. “You’re trading out your dollars for a physical asset outside of the banking system.”
Gold appreciates at about 8% a year on average, according to JPMorgan, which makes it popular among those seeking a hedge against inflation.
But that also means buyers should plan to hold onto any physical gold they buy for a minimum of one year, and preferably much longer, Huff says.
An increase of 8% would also help cover any discounts or expenses necessary to sell the gold for cash since dealers don’t always pay spot prices.
Of course, 8% is well below the roughly 25% average annual returns over the past decade for shares of Costco stock, but gold investors are often seeking a less risky alternative to the stock market.
2: Start researching dealers early on
While waiting for gold to appreciate, Huff recommends researching and connecting with reputable dealers who buy precious metals at a fair price.
This can be especially helpful if circumstances require an earlier-than-planned selling of the gold stash.
“Whenever the time comes, you already have that in your back pocket. You’ve already vetted them out and know the process,” he said.
It’s also worth getting familiar with the different formats available since coins from the US Mint typically have higher demand and fetch better prices than bars or jewelry.
In addition, Huff says silver makes a nice complement to gold for a simple investing strategy.
“A ratio that we watch is the gold-to-silver ratio,” he said. “When gold becomes cheaper relative to silver, you could sell some of your silver or trade some of your silver for gold and flip-flop your portfolio that way.”
3: Keep it safe
While silver can take up a lot of space, Huff says gold is surprisingly compact.
“You could fit a million dollars’ worth of gold in two hands,” he said.
To secure smaller stashes, Huff says a small fireproof safe — preferably bolted to the floor — is probably sufficient. A fully insured self-storage unit is also a reasonable option.
Larger holdings can be kept at private depositories that specialize in precious metals and collectibles and include insurance.
“The approach should be that you never want to sell it,” Huff said. “You never want to spend your savings, and gold should be approached that same way.”
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