Along with $1.50 hot dogs and sodas, gallons of mayonnaise and packages of socks, warehouse retailer Costco has been selling gold bars since October, according to the New York Times.
Now, Costco sells gold and silver worth up to 200 million dollars each month, according to a Wells Fargo analysis.
Online forums and Reddit threads have been created where customers give each other advice on how to buy the rods before they run out.
“I’ve gotten a few calls that people see online that we’re selling gold bars, but when we put them up on the website, usually they sell out within hours,” Richard Galanti, Costco’s executive vice president and chief financial officer, said on an earnings call in September.
Costco began selling gold bars in October
Costco now sells bars 24 carat, according to its online store. Bars can only be purchased by members and their price varies depending on the market prices. As of Thursday, the bars were sold out online, but the Wall Street Journal reported that buyers snapped them up for about 2,000 dollars in December.
Since January, Costco has also been selling silver coins, which are advertised as 99.9% pure silver, according to a Wells Fargo analyst report.
People are buying gold at periods of unrest.
The precious metal has scored a number of recordas jumped to $925 per centimeter, marking up about $100 since the beginning of March.
“Buying gold becomes more common during economic times turmoil. Although the US economic outlook has improved and inflation has slowed, it remains higher than the Federal Reserve’s targets,” said Sadik S. Antatia, chief investment officer at BMO Global Asset Management. “And a few days ago, it was revealed that core inflation was higher of expectations.
Investors worried about the rally
“Geopolitical concerns could also increase the interest in gold,” said Andatia. “There is more interest in gold than the currency of Ukraine collapsed after the Russian invasion,” he said.
“For those looking to buy gold for the first time, Costco delivers ease“, said Anattia. “People can physically walk in and pick it up and that’s it, as far as opening an account and buying it, Costco makes it very easy for them.”
How much does Costco make from this?
Probably not too much.
Given pricing and shipping costs, it’s likely a “very low-margin business at best,” Wells Fargo analysts wrote in a note to clients.
“Costco sold more than 100 million dollars of gold during the first quarter or the three-month period ended Sept. 30 last year,” Galanti said on a December earnings call. “However, these sales have likely increased since then and may now be running at 100 to 200 million dollars per month, which could increase its sales figures by 1%».
“The reason we looked at this is that it’s becoming an increasingly important factor in their sales,” said Edward Kelly, Wells Fargo’s chief executive. “It’s not like $100 or $200 million a month is a lot for Costco, but it’s a new business and they didn’t have that business last year.”
“In the quarter ended Dec. 31, Costco’s e-commerce sales increased by 18% compared to the same period last year, partly due to demand for precious metals,” Galanti told investors on an earnings call in March.
Investing in metals can be volatile
The Commodity Futures Trading Commission has urged caution when buying gold because precious metals can be extremely changeable.
“Like other commodities, the prices of precious metals rise as demand increases, so when economic worry or volatility is high, the people who typically benefit from precious metals are the sellers“, the organization said in a statement.
“The Commission is probably putting out this warning to signal that this is not a guaranteed investment,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report. He recommends that the average person invest the 3% to 5% of his assets in gold.
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