Recently, buying physical gold has become trendy, especially with Costco stocking gold bars, and it is gaining a lot of attention on social media. I read that it’s one of Costco’s hottest sellers and they can’t keep it in stock.
This got me thinking, those buying gold signs you see often offer around 50-70% of the spot price. This is similar to large collectibles markets like sports cards, non-sports trading cards, and comic books, where dealers pay less than market value to ensure a profit margin.
So, does this make physical gold bars a poor investment? While you might try to sell them at near-market prices, finding a buyer without a known reputation can be challenging. It seems you’re already losing at least 25-30% right from the start. Even if you use a well-known platform to sell on your behalf, you’re still facing 15-20% fees.
The only places offering 50-70% of the spot price are typically those buying gold jewelry, which is often stolen. Any reputable coin shop or pawn shop will pay at or near the spot price for gold.
The premium they charge is how they turn a profit.
The coin store pays spot price for a gold Buffalo—let’s use $2500 as an example.
They take a premium, often between 5% and 6% of the coin’s worth more like 10% to 20% for silver when they sell it to the buyer. Thus, they will sell the coin to someone for roughly $2600 if they come in while the spot is roughly the same.
Due to the higher premium that coins command over bullion, they frequently pay spot for coins but less than spot for rounds or bars.
When you buy, you always wind up paying more than spot and get less when you sell. It’s how they generate revenue.
It’s not the wisest option when making an investment. Where will you discard your ten ounces today? Who is making the purchase? If someone just purchases one or two ounces, are you still going around the town to sell it?
You don’t purchase gold to make fast money. For that, you play alternatives.