Here’s The Real Reason People Are Buying $200 Million In Gold From Costco Every Month

Costco has sold gold bars since the fall. They get more than the spot price of gold, but it’s still a good deal compared to most places you’ll purchase it.

It’s one of the more unusual things that Costco sells, perhaps, and it’s gotten a lot of attention this month because of a Wells Fargo report suggesting Costco sells $200,000,000 per month in gold bars. That’s a run rate of $2.4 billion per year in gold sales. (Costco gross sales totaled $242 billion in 2023, so this would produce about 1% of sales.)

Some people are buying gold from Costco instead of buying it from actor William Devane.

Others are stocking up on gold because they think the end times are near and somehow Gold will still have value when currency won’t. (Others think that bitcoin will be last standing, somehow, in a world that no longer has electricity.)

But many people have been buying gold for rewards, selling the gold, and pocketing the rewards for themselves. The problem is that they usually have to re-sell the gold for less than they bought it for – eating into their margins.

Here’s someone buying a Costco gold bar, they say, as an investment. They muse on whether they could write off the gold bar as an expense ‘as a content creator’ (they’re making a video of the gold bar!) but they realize that reduces their cost basis in the gold and they’d owe the taxes back when selling the bar – plus the IRS might not like it, and telling the TikTok world you’re doing tax fraud maybe heightens your audit risk a little bit?


Buying Gold Bars from Costco

♬ original sound – Humphrey Yang

In this video he says he earned 1% cash back. It seems to me he’s doing this wrong. Here’s someone who sold their gold bars at 1% less than Costco’s price which means that even at 2% cash back they’re earning a spread on gold bar purchases.

Some people are buying and holding gold. Others are reselling. If they can reliably find someone to unload the gold on at a 1% discount to Costco pricing they’re winning. Your local ‘we buy gold!’ pawn shop is probably going to force a 10% haircut or more. Coin shops seem to be the best place (generally) to unload Costco gold.

Sometimes Costco is a rotating 5x category on rewards cards. There are cards that have done 3% back on wholesale clubs like Costco as a regular feature. And don’t forget that Costco Executive memberships earn an additional 2% back up to $1,000 in rewards.

Also, since we were talking about tax fraud, there are probably plenty of small businesses buying supplies and inventory from Costco and writing off the entire Costco purchase (including the Gold) against their business income, while converting the gold into personal cash, or just burying it in their back yard. I know of one career politician who left a treasure map for their heirs to find buried gold.

I have to think there’s another game that some people have intended to play with this – Costco returns. Buy gold, and keep it if the price goes up, or bring it back to the store within 30 days with your receipt if the price falls? At least that was their plan?

There’s a lot of fraud, too, and not just 98% of transactions with loyalty programs originating in China. Every day someone who gives their name as Noah buys a DoorDash DashPass with a fake credit card, using one of my email addresses. The order fails. Apparently DoorDash lets them order food wiht that card, though, and also various goods. The DashPass subscription gets quickly paused. Did I mention that the fraudster asks for a refund of their delivery that they never actually paid for? So I think about fraud risk a lot.

Ultimately buying Costco gold bars isn’t like dollar coins, where the U.S. mint sold $1 coins at face value with free shipping and delivered them to your home. You paid with a credit card and just had the hassle of depositing the coins at the bank. You’re putting out a lot of money, the price of gold fluctuates, and sometimes reselling deals go bad. Sometimes you wind up dealing with a shady counterparty, too. So there’s a lot of risk for a small margin, but some folks have been taking advantage of that margin.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Gary- No returns allowed on Costco gold. They are very strict and it clearly states that on the sign in the video as well

  2. If JQ Public is paying above spot for gold bars at a grocery/general merch store then that’s a generally contrarian sign that gold is going down. A lot. Sure, gold has acted quite well of late and it might rebound but whenever the public piles into an asset class they know very little about(and has no true utility) it usually ends poorly.

  3. Toomanybooks beat me to it. You can’t return gold to Costco. I’ve got quite a bit of precious metals that I purchased years ago. I quit buying gold when it crossed $1500 an ounce and quit buying silver at $13 an ounce. I’ll just let my daughter inherit it someday. It’s almost impossible short term to make any profit off of precious metals even if you purchase it during a sale of premium over spot. Who knows? With the government running up $1 trillion of debt every hundred it’s someday may be more valuable than you think.

  4. Reselling gold seems risky. Somebody who wants to take the same risk statistically, without the physical commute and shopping trip, is better off trading options.

    I hate Costco. I don’t love to hate them because they do have great products. Kirkland trash bags, olive oil, nitrile gloves, and microfiber towels are stellar.

    My beef with Costco is the customer service. At the Ann Arbor, Michigan warehouse, I was condescended to when attempting to return eyeglasses. “We would lose money if we accepted this return,” well no sheet? That’s how every return works. They did eventually agree to a return, but that’s not how customer service works. The Costco return policy does not exempt eyeglasses, for those wondering.

    At the St Louis, MO warehouse, a supervisor yelled at me in earshot of all cashiers. She thought I was stealing because I didn’t queue up to check out. (She was also an old white lady profiling a POC.) In fact I’d just entered the store with an item to return. I entered through the front entrance instead of the exit. Why did I do this? Because the exit wasn’t clearly marked with “returns.” Some warehouses have this signage, but others don’t.

    In Manhattan NYC’s warehouse on the upper east side, I made a return and was admonished for not telling the clerk that it was a return of an online purchase. Uhh ok we can blame Costco’s ancient IT, because every other store is smart enough to know that automatically, but in the meantime don’t admonish your customers.

    In Durham, NC and in Danville, CA, I’ve shopped at warehouses using a gift card and no membership. Both cashiers gave me a hard time about not being a member, even though both greeters confirmed I could shop with the gift card without a membership.

    I can only conclude I’m too high class for Costco. At the shops of another PNW-based company, Nordstrom, I’ve only ever been treated with the utmost respect.

  5. Way back in 2010(ish) there was a whopper of a deal that I used to buy gold. Microsoft came out with their Bing search engine and had to bribe people to use it. They were giving you a 20% cash rebate up to $200 for searching for items on Bing and clicking through to buy it at an affiliated website. One of the included shopping sites was eBay. So, I (and many others) was buying American Eagle 1oz gold coins for 20% off. At the time, the price of gold was about $1000/oz and Microsoft paid me $200 for each purchase. I only bought 5 and a Mac computer before it was shut down. Lot’s of fun. I still have the coins. I hope they’re legit.

  6. Lots of red flags with Mr. Professional…. you’ve done returns in Michigan, Missouri, and NYC, but then also attempted purchases with a gift card (and no membership) in CA and NC? Got it.

  7. Jimmy, what red flags? Costco has a nationwide footprint and I am a frequent traveler. My returns are under 0.1% of the gross merchandise value of my purchases and, other than the eyeglasses, were factory sealed and resaleable products. I’ve allowed my membership to lapse at times. All this is fully compliant with regulations and policies.

  8. @Jimmy beat me to it. No, nothing sketchy there at all, and the claim of being targeted because he was a POC is a crock. How about they know a crook when they see one, regardless of skintone.

  9. C_M, I’ve been seeing your comments on this blog for years. You’ve said you’re a white guy from a Republican state. I can’t remember which one. But that doesn’t matter. There’s a good reason why high class professionals don’t congregate where you live. Your bigotry.

    I can only hope your daughter receives a proper education and the right exposure to the world to see how ignorant and dangerous your belief system is.

    Let’s start with some extremely basic facts. Exactly what, other than your unfounded prejudice, leads you to see anything I post as “sketchy”? On what grounds do you feel an old white woman, working in a retail capacity where the bias toward POC is extremely pervasive and well documented, wasn’t acting out of prejudice?

  10. I thought the same thing. I’ve had memberships at Costco and Sam’s for years and never needed to make a return, let alone multiple ones in different states. But then again I’m a lowlife who joined the Army because I didn’t have any options according to no class professional.

  11. Uh, dollar coins Gary? The last one dollar coin made by the US with 90% gold for circulation was in 1889, though some commemoratives were produced till 1922. There are coins with higher nominal values ($5, $10, etc.) sold by the mint. But as usual if people don’t know what they are doing they’ll be skinned alive by dealers promising “great returns.” (If they are so good why are they selling anything?) Granted the U.S. dollar, like most currencies, is backed by nothing but the country itself, but that is more than bitcoin. As for precious metals…sure if you have physical possession, can ride out the wild swings, and know you’ll lose below market value both buying and selling. Then wait a few decades and hope that ship hasn’t sailed.

  12. The fact Gary mentions Costco returns as an angle shows he has no clue what he’s talking about and diminishes heavily the credibility of what he’s talking about.

    It’s such a basic fact that, if he can’t get right, and premises his entire speculation on, there’s nothing but wild conjecture (and ill informed one at that).

  13. Too Many, it’s a fallacy to say that someone has diminished credibility because of a single oversight.

    If your IQ is 120 or below, which encompasses a large majority of people, then your brain might not be able to handle the nuance/dissonance that a credible source can make elementary errors. People with IQs over 120 can filter out the erroneous material and absorb the substance.

    It’s obvious Gary knows what he’s talking about enough to make his speculation always worth listening to. If something’s incorrect, it’s incorrect in isolation. It has no bearing on his credibility overall.

  14. So the “real reason” is a bunch of loosely connected ideas that may or may not be relevant and one (gold went down, I guess I’ll return it) that is straight nonsense. Thought leadership, indeed.

  15. To simplify (oversimplify), the “real reason” is to resell for profit. Plain and simple.

    It’s wrong to call returning gold “straight nonsense” because Costco famously takes back almost anything. They famously take back Christmas trees after Christmas. They’ll take back an 80 pack of snacks after you’ve eaten 79 and decided they didn’t taste good.

    The “thought leader” tag on this blog is semi-sarcastic/playful/tongue in cheek, just so you know.

  16. @high class professional – I don’t understand why you keep shopping at Costco (in all these different cities, no less) when you have had so many terrible experiences? I can only speak from my own experience, and Costco is just about the only place that has never given me any problems with returns.

  17. Bobo, I keep >99.9% of the GMV of my purchases, and with an active membership, checkout can be accomplished without calling a supervisor to plug in an override code.

    The price and quality of Costco products are usually exemplary. Virtually all household staples should be bought at Costco.

  18. @highclass professional

    I wish you had had better experiences at the Costco locations you mention. Not knowing you except by your posts here, I cannot know how you behave when in situations like those you describe. Hence, I will offer no criticism or advice on how my wife and I handle such situations.

    As for buying gold, I’ve often wondered who, in ordinary circumstances as well as a crisis or impending crisis situation, will want to buy gold at what I would consider a reasonable discount. I wonder whether bullion would be easier to sell than coins. I don’t know where in the US gold coins are legal tender; apparently they have only numismatic value.

  19. Its easy enough to sell Costco Gold locally through FBM and meet at your bank lobby. Everyone bar/coin I’ve sold locally has been profitable.

  20. Love it Gary: “Others are stocking up on gold because they think the end times are near and somehow Gold will still have value when currency won’t.” Hold gold if you live in Russia and expect things to go pear shaped, sure. Expect gold to be used after “the world-wide apocalypse,” why would anyone want it? Gold, particullary small purchases, has the big problem you pay above spot and sell below (often by a lot). You risk loss or have to pay for storage. And, it pays no interest/dividends.

  21. Vazir, I appreciate you for not being presumptuous. My behavior was very high class. I do believe a customer should act respectfully which means I never raise my voice. I never roll my eyes or make disapproving gestures. I never make demands or threats. I don’t cause a scene whatsoever. I wait my turn in line.

    I feel Costco would be completely justified in banning misbehaving customers. Fortunately, I’m extremely high class and well behaved.

    The problem is squarely Costco’s service level. It’s just not high class. I’m confident if I ever were to return something to Nordstrom (I never have), they’d apologize profusely that the product didn’t fit my needs, and they’d thank me for my patronage. Nordstrom doesn’t charge me any membership fee. In fact they pay me back with rewards points.

  22. drrichard – many of us manufactured spend buying Susan B Anthony dollar coins from the mint at face value with free shipping. It’s real

  23. I bought a fair amount of gold back in the 2007-2009 recession. It’s a diversification tool.

    I don’t remember Costco selling gold back then. If they did I would have used them. They are very reputable, unlike many players in the space.

    They are “safe and easy”. Many trust them. Makes sense that people trust them with gold.

    Gold doesn’t make sense for most people. But for some like me it’s a nice diversification asset.

    In addition, the market could tank this year given American political turmoil, international events, and a tipping RE market.

  24. High class professional – your republican comment sounds so .. liberal. LOL
    High class you surely are

  25. Earlier this year in a private online group one of the members reported they’d already bought $1M+ of Costco gold (they obviously use multiple Executive accounts). IT’S ALL ABOUT THE SPEND – they get 2% back on Executive, plus at least another 2% back via a cashback credit card. Even if they sell at a price that’s 2% less than the price they paid Costco they’ve still made a 2% profit on the deal (assuming the price of gold hasn’t changed).

  26. @David Moore. The 2% Executive kickback applies to the first $50,000 of purchases at Costco each year. I don’t think the 2 % Citi Costco card kickback is limited. There exist crazy good deals (like the gov’t silliness on dollar coins), but rarely do I see ones as crazybas some imagine ( like 4% total on gold).

  27. @Dave W: “The 2% Executive kickback applies to the first $50,000 of purchases at Costco each year.” Yup, thus the MULTIPLE Executive accounts for the heavy hitters like the $1M+ buyer I mentioned. There are many CCs offering at least 2% back (a few offer even more), the Citi Double Cash comes to mind.

  28. @David Moore

    Citi Double Cash CC is a MasterCard and not acceptable at Costco warehouses….

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