Are the Costco platinum bars worth buying? Here's what finance pros have to say.

By Charles Passy

They cost over $1,000, but when it comes to precious metals, gold is still often all that glitters, experts say

After selling millions of dollars in gold bars, Costco Wholesale Corp. is now looking to create the same buzz for another precious metal - namely, platinum. But should investors pay heed?

The warehouse retailer (COST) has started selling one-ounce platinum bars priced at $1,089.99 apiece, which is slightly higher than the metal's current value of roughly $1,000 per ounce on the commodity market. Costco's foray into selling gold bars started last year and has proven a huge success, with the company reporting that sales reached $100 million in 2023.

Platinum (PL00) is a different commodity than gold (GC00), however. The latter has all the glittering buzz, literally: Think items ranging from gold engagement rings to vodka with gold flakes suspended in it. Gold also has seen a surge in value, rising in the last 10 years from about $1,200 per ounce to nearly $2,700 currently.

While platinum is used in jewelry, much like gold, it has more relevance as an industrial metal. It finds its way into everything from gas-powered or hybrid vehicles - specifically, it goes into manufacturing catalytic converters - to certain medicines. That might make it more valuable from an investment standpoint, but history has shown otherwise, at least as of late: Platinum's current price of about $1,000 per ounce is actually lower than the price of about $1,250 a decade ago.

Edward Sterck, director of research at the World Platinum Investment Council, told MarketWatch that platinum pricing has been challenged over expectations that electric cars will come to dominate the automotive market - thus, no need for catalytic converters. But he makes the case that platinum could do well in the years ahead for a number of reasons, including its other industrial uses and the fact it's currently in short supply. As it is, he notes that platinum is considerably rarer than gold.

Plus, Sterck said that unless you believe fully electric cars are really going to become the norm in the near future, platinum will continue to have significant value in the auto world because of those catalytic converters.

But not everyone is convinced that platinum is a great investment - for a host of reasons.

For starters, many financial advisors eschew the idea of investing in metals as a whole, including both gold and platinum, because they don't have the same intrinsic worth as equities.

"We would rather invest in a company that does something with gold or platinum" as opposed to buying the metal itself, said Yusuf Abugideiri, chief investment officer of Yeske Buie, a financial firm.

Even if you see a place for metals in a portfolio - and many advisers do view them as a hedge against inflation - the fact remains most people understand gold much better than they do platinum because of gold's ubiquitous nature and popular appeal, advisers note.

"Investors don't flock to it," said Michael Martin, vice president of market strategy at TradingBlock, a trading technology company. He added it's also hard to ignore the idea that the automotive market is likely to go electric in the long run.

Either way, financial experts generally agree that if you want to own a precious metal for investment purposes, you're far better off buying it in the form of an ETF, rather than as a physical bar like the ones sold at Costco.

That's because owning physical platinum or gold means worrying about issues like storage and insurance, to say nothing of the fact it's nowhere near as liquid as shares in an ETF - meaning when it comes time to sell, you'll have to find a buyer and then arrange to bring the metal to them.

Nevertheless, Jimmy Lee, chief executive officer of the Wealth Consulting Group, an advisory firm, said there's always "a certain segment that just wants to own some physical stuff." Like other advisers, Lee said it most likely has to do with fear of an uncertain world - and hence, the desire to have tangible assets on hand.

Clearly, that's the idea that Costco must be banking on. Ivan Feinseth, an analyst with Tigress Financial Partners who tracks Costco, said it's only logical the company would move into selling another precious metal after the gold rush it sparked among its members.

Feinseth added that the platinum offering fits into Costco's history of finding items that create buzz and build further recognition for the brand.

"They try to have a halo effect," he said of Costco's approach.

-Charles Passy

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10-03-24 0942ET

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