It seems like Costco is becoming a popular destination for more than just budget-friendly hot dogs.
The retail giant has experienced a significant increase in sales ever since it started offering 1-ounce bars of 24-karat gold last September. With the gold bullion flying off the shelves faster than they could restock, Costco decided to expand its precious metals selection to include silver coins in January.
Based on estimates from Wells Fargo, the sales of gold and silver are likely bringing in between $100 million and $200 million per month for the members-only warehouse chain. This sales boost coincides with the soaring prices of gold.
The surge in sales can be attributed, in part, to "Costco's competitive pricing and strong customer trust," as stated by Edward Kelly, an equity analyst at Wells Fargo. Kelly mentioned in a recent research note that "the increasing number of Reddit posts, rapid online sell-outs, and Costco's substantial monthly eCommerce sales indicate a significant surge in momentum since the introduction of these products."
Costco has not yet responded to requests for comments as of Wednesday.
Undoubtedly, the chatter online plays a role in the soaring demand for Costco's gold. However, another driving factor is people's desire to protect themselves financially in the current economic climate.
Gold, known for its stability and resistance to the volatile nature of the stock market, has traditionally been seen as a dependable hedge against inflation — a concern that persists, as highlighted by the latest CPI figures.
Contributing to its appeal, the price of gold has been on the rise over the past year, reaching several milestones in recent weeks alone — surging from a peak of $2,160 per ounce in early March to today's rate of $2,353.15 per ounce. Since January, the value of gold has increased by 14.5%, outperforming all major indices on the New York Stock Exchange. Analysts anticipate that gold prices will remain relatively stable in the coming months, according to forecasts.
Costco offers two varieties of gold bars: a 1-ounce PAMP Suisse Lady Fortuna Veriscan bar, featuring the image of the goddess of fortune with a cornucopia, and a 1-ounce bar from South Africa's Rand Refinery, displaying an elephant motif. Additionally, Costco sells 1-ounce Maple Leaf silver coins in packs of 25 for $650.
According to estimates from Wells Fargo, gold bars at Costco are priced approximately 2% higher than the spot price.
According to Kelly, the pricing set at that level along with the shipping costs indicates that the business is operating on very thin profit margins, if any.
