Costco selling as much as $200 million in gold bars monthly, Wells Fargo estimates

Gold
has
turned
into
money
for


Costco,
where
yellow
metal
sales
begun
last
year
have
turned
into
a
cash
cow
for
the
big-box
retailer.

In
fact,
sales
are
so
brisk
that
analysts
at


Wells
Fargo
expect
revenue “may
now
be
running
at”
$100
million
to
$200
million
a
month,
a
rapid
acceleration
since
bullion
hit
the
warehouse
club
late
in
the
summer
of
2023.

“Our
work
suggests
there
has
been
significant
interest
given
COST’s
aggressive
pricing
and
high
level
of
customer
trust,”
Edward
Kelly,
an
equity
analyst
at
the
bank,
said
in
a
note
to
clients
Tuesday. “The
accelerating
frequency
of
Reddit
posts,
quick
on-line
sell-outs
of
product,
and
COST’s
robust
monthly
eComm
sales
suggests
a
sharp
uptick
in
momentum
since
the
launch.”

If
Kelly’s
assessment
is
correct,
that
would
represent
quite
a
move
for
a
product
that
only

debuted
last
August
and
generated
about

$100
million
in
sales
in
Costco’s
fiscal
first
quarter
that
ended
in
late
November
2023.

Costco
is
selling
1-ounce
bars
made
of
nearly
pure
24-karat
gold.
While
the
price
is
not
disclosed
online
to
nonmembers,
it’s
estimated
that
the
product
generally
sells
for
about
2%
above
the
spot
price,
which
as
of
Tuesday
morning
was
around
$2,357
an
ounce.
That
would
put
the
price
at
Costco
just
more
than
$2,400.

Gold
has
been
on
a
tear
this
year,
with


spot
prices
rising
more
than
13%
in
2024,
pushed
higher
by
a
persistent
bout
of
inflation
that
started
in
2022
and
investor
fear
over
the
state
of
the
deteriorating
U.S.
fiscal
situation.
The
government
is
on
pace
for
a
$2
trillion
deficit
this
year,
adding
to
a
total
debt
load
that
has
surpassed
$34.6
trillion.

So,
selling
gold
bars
has
been
easy
for
a
store
priding
itself
on
its
variety
of
consumer
choices.

There
are
a
few
catches:
Sales
are
limited
to
five
per
customer
(up
from
two
previously)
and
while
the
benefits
to
Costco’s
top
line
are
clear,
it’s
a
little
different
story
for
bottom-line
profit.
That’s
because
in
addition
to
the
low
premium
the
store
gets
for
gold
bars,
it
further
offers
2%
cash
back
for
executive
members
and
another
2%
for
those
who
use
their
Citigroup
credit
cards.
The
sales
are
adding
about
3%
to
general
merchandise
sales
but
not
contributing
much
to
profit,
Kelly
said.

“Pricing
at
that
level
and
shipping
costs
suggests
it’s
a
very
low
profit
business
at
best,”
the
analyst
wrote.

As
an
investment,
though,
it
makes
a
lot
of
sense
in
these
times.
While
gold
is
seen
as
a
natural
inflation
hedge,
there
are
other
factors
at
play,
including
geopolitical
unrest
in
the
Middle
East
and
Eastern
Europe
that
has
created
uncertainty
about
financial
stability.

Central
banks
have
been
large
buyers
of
gold,
especially
in
Asia,
and
the
run-up
in
prices
this
year
suggests
that
while
purchases
are
down
in
the
early
part
of
2024,
they
are
likely
to
pick
up
later,
according
to
DataTrek
Research.

“The
move
suggests
that
many
foreign
governments
feel
the
need
to
hedge
geopolitical
outcomes
that
might
be
negative
catalysts
for
other
risk
assets
like
stocks,”
DataTrek
co-founder
Nicholas
Colas
said
in
a
recent
market
note. “The
only
good
news
is
that
this
reinforces
the
idea
of
gold
as
a
reasonable
hedge
for
diversified
portfolios.”

Costco
officials
did
not
immediate
return
a
request
for
comment.