3 things Costco shoppers should know before buying gold bars

Costco sells an estimated $200 million worth of gold and silver bars per month, but shoppers should keep in mind some key things before buying.

• Costco sells an estimated $200 million worth of gold and silver bars per month.
• Gold expert Taylor Huff says with the popularity, some buyers might not know what to expect.
• Huff recommended three things Costco shoppers should keep in mind when buying gold.

Gold and silver bars are some of Costco's hottest items this year, with the warehouse club selling through its supplies to the tune of $200 million a month.

Each new batch of gold bars sells out "within a few hours" of being released for a small mark-up over its spot price.

The Wall Street Journal reported that some buyers have been getting a crash course in commodity trading as they try to make a quick profit on their gold stash.

But gold expert Taylor Huff, CEO of My Gold Advisor, says that's the wrong approach.

"Some people will just go buy gold from Costco, even though they don't know why they're buying it, or what to do with it," he said.

Huff shared his top three tips that shoppers should remember when buying gold.

1: Gold is for saving, not quick profit

"You don't buy physical gold to flip a profit. You buy physical gold to store wealth and to protect what you've earned," Huff said. "You're trading out your dollars for a physical asset outside of the banking system."

Gold appreciates at around 8% per year on average, according to JPMorgan, which makes it popular among those seeking a hedge against inflation.

But that also means buyers should plan to hold onto any physical gold they buy for a minimum of one year, and preferably much longer. Huff said.

An increase of 8% would also help cover any discounts or expenses necessary to sell the gold for cash since dealers don't always pay spot prices.

2: Start researching dealers early on

While waiting for gold to appreciate, Huff recommends researching and connecting with reputable dealers who would buy the bars at a fair price.

This can be especially helpful if circumstances require an earlier-than-planned selling of the gold stash.

"Whenever the time comes, you already have that in your back pocket. You've already vetted them out and know the process," he said.

In addition, Huff said silver makes a nice complement to gold for a for a simple investing strategy.

"A ratio that we watch is the gold to silver ratio," he said. "When gold becomes cheaper relative to silver, you could sell some of your silver or trade some of your silver for gold and flip-flop your portfolio that way."

3: Keep it safe

While silver can take up a lot of space, Huff said gold is surprisingly compact.

"You could fit a million dollars worth of gold in two hands," he said.

To secure smaller stashes, Huff said a small fireproof safe — preferably bolted to the floor — is likely sufficient. A fully insured self-storage unit is also a reasonable option.

Larger holdings can be kept at private depositories that specialize in precious metals and collectibles and include insurance.

"The approach should be that you never want to sell it. You never want to spend your savings, and gold should be approached that same way," Huff said.