Is Gold From Costco a Good Deal? Here’s Why It May Not Pay Off, According to Preston Seo
Written by
Lydia Kibet
Edited by
Rebekah Evans
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Costco is the go-to store for bulk items and $1.50 hot dogs. But in 2023, the wholesaler added gold bars to its inventory and the precious metal has been flying off the shelves ever since.
If you’ve been contemplating buying the bars, money expert Preston Seo thinks it’s not a good deal.
In an Instagram post, Seo said he thinks buying gold from Costco may not pay off as well as it appears. Here’s why.
Costco Sells Gold at a Premium
Costco doesn’t sell gold at spot price. Like most retailers, it charges a premium above the market value of gold. And that premium eats into your returns.
“When someone sells back gold to dealers, they typically pay 5% to 10% below spot price. So instead of getting $4,000, the actual payout is going to be closer to $3,600 to $3,800,” Seo explained.
After factoring in dealer spreads, taxes and selling complications, the final number often surprises people. “It’s closer to a 50 to 65% return. Now, of course, that’s still solid, but nowhere near double. And that’s if a fair buyer can be found and the exit navigated cleanly,” he added.
Physical Gold Isn’t Taxed Like Stocks
One of the biggest surprises for first-time gold buyers is how it’s taxed. Physical gold doesn’t get the same capital gains treatment as stocks or ETFs.
“Physical gold isn’t taxed like stocks,” Seo said. “The IRS classifies it as a collectible, like art or vintage cars, with capital gains taxed at about 28% depending on your tax bracket. On a $1,600 to $1,800 gain, that’s roughly $380 to $500 straight to the IRS.”
Selling Gold Isn’t as Anonymous as People Think
Many people think investing in precious metals like gold is the best way to anonymize wealth, but that’s not the case when it’s time to sell.
“Gold is anonymous when you purchase it,” Seo said. “But when you sell it, let’s say someone hits a threshold like 1 kilo of gold bars or 25 1-ounce gold coins like the Maple Leafs, dealers must file form 1099B with the IRS and that sale gets reported.”
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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