Note: Table of Contents links work on PC, but not in Android app
Table of Contents
- What discounts are available?
- How much is the metal worth now?
- Do I pay sales tax?
- Why do some 1oz gold coins/bars cost more than others?
- Can I return it to Costco?
- Where can I sell it?
- Should I buy physical metal or an ETF?
- What about mining stocks?
- How should I store my metal?
- Is Costco metal useful for getting credit card bonuses?
What discounts are available?
Costco Executive Cash Back
- Executive members earn 2% cash back on all Costco purchases, including gold and silver.
- Limited to $1,250 cash back per 12-month period (equivalent to $62,500 spend).
- Refunds are Costco credit, not cash, usable only at Costco locations (not online or at gas stations/food courts). However, you can use them to purchase shop cards which can be used online and for gas.
- Bank of America Customized Cash [bankofamerica.com]: 3% cash back if you select "Online Purchases" as your category at Costco.com; up to 5.25% with Preferred Rewards (limited to $2,500 in spend per quarter); only 2% (3.5% with platinum rewards) at physical Costco stores, subject to the same $2,500 per quarter limit.
- Bank of America Unlimited Cash [bankofamerica.com]: Up to 2.625% cash back with Preferred Rewards; unremarkable 1.5% without preferred rewards.
- Other Cards: Many cards, including Wells Fargo Active Cash [wellsfargo.com], Citi Double Cash [citi.com], and Citi Costco Visa [citi.com] offer 2% unlimited cash back.
How much is the metal worth now?
A troy ounce (ozt) is 31.1g or 1.09oz.
Spot prices:*JM Bullion buy prices**:
- PAMP 100g gold bars [jmbullion.com]
- PAMP 50g gold bars [jmbullion.com]
- 1ozt Gold American Buffalos [jmbullion.com]
- 1ozt Gold American Eagles [jmbullion.com]
- 1ozt Gold Canadian Maple Leaves [jmbullion.com]
- 1ozt Gold PAMP bars [jmbullion.com]
- 1g Gold PAMP bars [jmbullion.com]
- 10ozt Canadian Mint Silver Bars [jmbullion.com]
- 1ozt American Silver Dollars [jmbullion.com]
- 1ozt Platinum Canadian Maple Leaves [jmbullion.com]
- 1ozt PAMP platinum bar [jmbullion.com]
** JM Bullion is one of the few vendors that publish buy prices online, so I've listed them for reference. This is not an endorsement of JM Bullion (or of any seller). JM Bullion generally pays close to top dollar. You can shop around and probably get a little more, but you won't get a lot more.
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Do I pay sales tax?
Sales tax varies by state. Detailed state-by-state information [usgoldbureau.com]
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Why Do Some 1oz Gold Coins/Bars Cost More Than Others at the Same Spot Price?
Prices reflect both metal value and collector value. For example, an American Buffalo has higher collector value than most PAMP bars, even though both contain the same metal value at 1ozt of gold. If you only care about metal value, opt for the lowest-priced products.
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Can I return it to Costco?
No. All sales are final. No price adjustments or returns. Costco does not buy gold, and is unlikely to cancel your order before it ships.
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Where Can I Sell It?
Lots of places will buy gold. Shop around for the best price.
- Local coin shops often pay well and provide immediate cash.
- Online vendors such as JM Bullion [jmbullion.com], Kitco [kitco.com], and AMPEX [apmex.com] offer competitive prices but you must pay insured shipping.
- Jewelry stores and pawn shops will buy gold but typically at lower prices.
- eBay is not recommended due to potential issues.
Is physical gold better or worse than an ETF?
Neither option is inherently better; they each have unique advantages and disadvantages:
- Transaction Costs: Buying physical metal often incurs transaction costs, which is the difference between the buying and selling price. However, executive cash back and credit card discounts often eliminate these costs, or even create a negative transaction cost, allowing for small, but risky profit if you quickly sell.
- Holding Costs: Gold ETFs have no transaction costs at most discount brokerages, but incur holding costs. ETF management fees range from about 0.1% to 0.3% annually. Over time, this means that the metal value of physical gold will always outperform ETFs over the long term, as management fees accumulate about 1% every 4-7 years.
- Security: You are responsible for securing physical gold. If you have a safe place to store it, the holding cost is zero. ETFs securely store and insure the metal for you.
- Tax Reporting: Brokerages and ETFs will file a 1099 with the IRS. In contrast, selling physical gold usually does not result in a 1099 unless the sale exceeds $10,000. Some individuals may misuse this for tax evasion, but that is a felony, with penalties of up to $250,000 in fines and up to five years in prison.
- Theft Risk: Electronic gold accounts can be hacked and are not immune to theft. The debate over whether physical or electronic gold is more susceptible to theft is inconclusive, and will depend on how well you secure your electronic accounts and/or physical assets.
- Value Considerations: ETFs represent a "pure metal" investment, focusing solely on metal value. Physical gold may also have collector value, which fluctuates independently of metal prices.
- Sales Tax: ETF purchases are exempt from sales tax, which is a big advantage in states that impose sales tax on physical metal purchases.
- Simplicity: ETFs are sold in one market, at one price. Your broker handles tax, cost basis accounting, and beneficiary tracking, and the ETF handles storage and insurance. You must manage these things with physical gold. In addition, when you sell, you have to shop around for the best price.
- Short-term trading: Electronic gold is superior for short term trading. Physical gold is less convenient, may have a transaction cost, and must be shipped. Electronic gold management fees are negligible over the short-term. Electronic gold also enables futures trading.
What about mining stocks?
Mining stocks are not metal and are inherently different investments. They tend to move in the same direction as the metal they mine, but that is not guaranteed, and they are also correlated with the overall stock market. There is no apples-to-apples comparison between stocks and gold.
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Where Should I Store My Metal?
- Store it securely, avoiding obvious places like safes, jewelry boxes, or bedroom drawers.
- Consider well-hidden locations to prevent theft.
- Do not tell people you have gold in the house.
- Store with receipts so you can prove cash basis to the IRS when it is time to sell.
- Add a note with the location of the metal with your estate documents. This way, if something happens to you, your executor or guardian can find the metal. Otherwise, it may be lost forever in your hiding place.
Can I use Costco Gold to meet the spend limit on a credit card deal, such as Chase Ink's? [thepointsguy.com]
Possibly, but there are other ways to reach the spend amount. You take the risk gold will go down between when you can buy and sell it. As a lower-risk alternative, you can pay taxes via credit card with a fee under 2% and get your money back with your tax refund with no risk.
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14 Comments
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I actually bought in on this one. Value analysis:
- Costs $2658.24 if you get 2% executive and 2% credit card cash back.
- JM Bullion will buy it for $2678 as of right now.
- So, a negative twenty dollar transaction cost. Nice.
For my specific deal, I traded ETF shares for physical gold:
- Sold 52 shares of IAU gold ETF from my IRA for $2669.6
- Bought this for $2769.00
- Getting 2% executive for $55.38 cash back
- Getting $131.25 cash back (5.25% of first $2,500 of online purchases from BofA customized cash card)
- Getting $2.69 cash back (1% cash back on the amount over $2,500 - I could have optimized this better by using another card.)
- Getting $300 bonus cash back for the first $1000 spent new card bonus
- Getting 14 months more of zero interest on that card, which I will invest in a HYSA at 4-5%, so about $100 or so interest income on that.
- Bought 37 shares of IEFA (international index ETF) because I have to keep IRA money invested.
Now I have to wait until the next quarter for my 5.25% category to reset before buying another ounce.
I actually bought in on this one. Value analysis:
- Costs $2658.24 if you get 2% executive and 2% credit card cash back.
- JM Bullion will buy it for $2678 as of right now.
- So, a negative twenty dollar transaction cost. Nice.
For my specific deal, I traded ETF shares for physical gold:
- Sold 52 shares of IAU gold ETF from my IRA for $2669.6
- Bought this for $2769.00
- Getting 2% executive for $55.38 cash back
- Getting $131.25 cash back (5.25% of first $2,500 of online purchases from BofA customized cash card)
- Getting $2.69 cash back (1% cash back on the amount over $2,500 - I could have optimized this better by using another card.)
- Getting $300 bonus cash back for the first $1000 spent new card bonus
- Getting 14 months more of zero interest on that card, which I will invest in a HYSA at 4-5%, so about $100 or so interest income on that.
- Bought 37 shares of IEFA (international index ETF) because I have to keep IRA money invested.
Now I have to wait until the next quarter for my 5.25% category to reset before buying another ounce.
Also
Also
True, the $300cb is not repeatable for me, and the 14m interest free will be 11m interest-free next time I do this.
The ETF sales are also only repeatable until I run out of shares of IAU. After that, I'll probably stop buying because gold is just so damn expensive right now. Those IAU shares were purchased in 2013 when gold was much lower - about $1200-1300 or so for about a 7% annualized rate of return.