It appears people are heading over to Costco for more than just budget-friendly hot dogs.
The warehouse club has seen a spike in sales ever since it began selling 1-ounce bars of 24-karat gold last September. With the gold bullion selling out faster than the store could replenish its stock, the wholesale giant expanded its precious metals to include silver coins in January.
According to one estimate from Wells Fargo, gold-and-silver sales are likely generating between $100 million and $200 million a month for members-only chain. The sales performance comes as the price of gold is reaching new heights.
Sales have climbed, in part, because of “Costco’s aggressive pricing and high level of customer trust,” said Edward Kelly, a Wells Fargo equity analyst. “The accelerating frequency of Reddit posts, quick online sell-outs of product, and Costco’s robust monthly eCommerce sales suggests a sharp uptick in momentum since the launch,” Kelly wrote in a research note this week.
Costco didn’t immediately reply to a request for comment on Wednesday.
To be sure, the online buzz explains part of why Costco’s gold is flying out the door. Another reason: People appear eager to shield themselves financially from today’s economy.
Gold, which is easy to purchase and impervious to the wild swings of the stock market, has historically been viewed by investors as a reliable hedge against inflation — which remains sticky as evidenced by Wednesday’s CPI numbers.
Adding to its current allure, gold prices have risen over the past year, hitting a few milestones in the last few weeks alone — climbing from a record high of $2,160 per ounce in early March to today’s price of $2,353.15 per ounce. The value of gold has grown 14.5% since January, higher than any of the major indices on the New York Stock Exchange. Gold prices are likely to stay flat over the next couple of months, experts predict.
Costco sells two types of gold bars: a 1-ounce PAMP Suisse Lady Fortuna Veriscan bar, which bears the imprint of a silhouette of the goddess of fortune with a cornucopia, and a 1-ounce bar from South Africa’s Rand Refinery, stamped with an elephant design. It also sells 1-ounce Maple Leaf silver coins at $650 for a 25-coin pack.
Gold bars at Costco are selling for about 2% above spot price, the Wells Fargo estimate stated.
Pricing at that level and shipping costs suggests it’s a very low profit business at best,” Kelly wrote.
