A lot has happened this year to distract people from what might have previously been noteworthy. Case in point, inflation has made headlines. It remains so elevated the Fed suggests it might not lower interest rates soon. That hasn’t been good for some investors. The war in Gaza also continues. That hasn’t been good for anything. There’s also a presidential election just around the corner. It promises to only get more distracting and divisive.
Combine all that with flooding out west, record snows in the east and a total eclipse covering a good chunk of the US and it’s easy to see why people may have been sidetracked enough to not notice something such as the price of gold. In the past year, gold has risen from $2,000 per ounce to over $2,400. That’s a bump of 20 percent – beating the heck out of the Dow Jones.
Equally surprising has been the absence of TV commercials once hawking gold coins with come-ons claiming “experts agree it’s sure to soon hit $5,000!” I never knew who those experts were but, in past years, TV gold pitchmen promised massive jumps were imminent. (According to CNN, Bank of America has predicted gold to hit $3,000 per ounce by 2025. We’ll see....)
For millennia, gold was the province of kings – particularly Midas. Since biblical days and before, gold had been coveted to the extent of causing wars. From colonial times until early this century, other than a slight bump during the Civil War, gold sat near $20 per ounce. In 1933, when the US went off the gold standard, it jumped to $35 per ounce. There it stayed until 1972/73 when US gold ownership was again allowed. That opened the door.
For as long as most can remember, the value of gold has been surpassed by platinum. Once known as “white gold,” platinum has fallen from grace. It now trades for under $1,000 per ounce. That’s bad news for those who paid a fortune for a platinum watch or ring. Not only has platinum’s value dropped, it looks very much like silver, which sells for under $30 per ounce.
For a time, investors purchased gold from banks. A few banks still sell it. The thing is, the commissions charged by banks has often been high. In some states, retailers also have to charge sales tax. That can add an additional five-percent or more.
Last year, a curious alternative came from discount retailer Costco. The chain announced it would begin selling one-ounce bars of .9999 pure gold. Those gold bars sell at Costco for two-percent over spot.
Costco is, of course, a major discount retailer. You’d think people of lesser means would shop there. With each gold bar selling for near $2,500, clearly, some have plenty of means. It has actually become a modern-day gold rush. Costco is – I’m not making this up – selling over $200 million in gold bars EVERY MONTH.
I thought those sales might be because of a savings discount. Not so much. I checked the price. At Costco, bars were pretty much the same price as local coin dealers. In addition, at Costco all sales are final and they won’t buy the bars back. To sell, one needs to take them to a local coin dealer or agreeable jeweler.
I understand the gold bars from Costco might not be available in store. Rather, they may need to be ordered online and shipped. The problem there is that some buyers reported delivery companies simply dropping off packages containing gold bars worth anywhere from $2,500 to $10,000 on their doorstep without requiring a live person or a signature. In this age of “porch pirates” I can’t think of a more horrifying potential scenario.
Regular readers know I’ve long been a strong advocate of taking physical possession of gold. In that respect, the Costco paradigm fits. The alternative is digital or virtual ownership. Whether it was Jews fleeing Nazi Germany or, more recently, Bosnians escaping the Serb force’s genocide, gold has been used to bribe border officials, open doors and help make a new start. That’s the true power of gold ownership. You can’t do that virtually.
So, has it been a good investment over time? Perhaps. It depends on when you buy. Gold also pays no dividends and can be wildly unpredictable. Nevertheless, for security, that malleable and lustrous metal continues to gleam. As for buying or selling at the best price, I’d take the 1960’s advice of Smokey Robinson and the Miracles…”You better shop around.”
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