Financial expert: Costco’s 1-ounce gold bars are a ‘mug’s game’

Costco has begun selling gold bars, and they are selling out like gold-filled hotcakes.

In a company earnings call last week, according to The Associated Press, CFO Richard Galanti claimed the gold bars, sold exclusively online, are “typically gone within a few hours” of appearing on Costco’s website. There is a two-bar limit per member.

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But Jason Royal, a principal writer and editor for the financial services company Bankrate, claimed the gold bars are more of a novelty than an investment.

“(The price of) gold has risen about 4.5% per year. That’s not a fully unattractive investment, but you can do better with very little knowledge in the stock market through investing in some basic funds,” Royal told KIRO Newsradio.

Royal said there aren’t many upsides to having physical gold, stating it can be a hassle to exchange it for currency.

“You’re basically in the hole 10-12% as soon as you purchase,” Royal added. “The returns are a lot a lot more spotty than stocks, and you have to keep it safe.”

No prices were listed Wednesday because of the bars’ unavailability, but The Associated Press reported last week the one-ounce gold pieces — offered in two designs — were selling for just below $2,000 — slightly more than the current market price of gold, which was approximately $1,835 per ounce, as of last week.

“If you’re buying physical bullion, you shouldn’t expect to get the fair value price when you go to buy or sell it,” Royal said. “That’s really what makes investing in physical bullion a kind of mug’s game.”

Jonathan Rose, the CEO of precious metal broker Genesis Gold Group, told The Associated Press that recent bank failures, inflation and individuals’ concerns about the U.S. dollar can cause some to start looking for alternative places to park their money — especially those with Costco memberships.

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“If someone’s going out to buy gold, that means they think that there’s some type of instability at the structural level of the market and/or the government itself,” added David Wagner III, head of markets and equities at Aptus Capital Advisors.

Gold has been described as an inflation hedge by many financial pundits. An index for the price of gold has risen about 5% since a year ago but has fallen from a peak reached in May.

The Costco gold bar is a non-refundable item.

Contributing: Chris Martin, KIRO Newsradio