Costco’s new gold sales approach is generating millions of dollars in monthly revenue. Last year, the retail giant began selling 1-ounce gold bars for $2,000 online and in select shops. Experts describe Costco’s sale of gold bars as a “smart move,” estimating that the retailer earns $100 to $200 million every month. The Wells Fargo equity research study said that the “addition of gold/silver” to its sales offerings “only reinforces its value position.”
Experts applaud Costco’s new gold sales technique
When Costco began selling gold in October 2023, CFO Richard Galanti stated on a company earnings call that bars being sold online were “typically gone within a few hours,” according to the Associated Press. At the time, the company restricted the sale to two bars per customer. However, a customer can now buy up to five gold bars.
Edward Kelly, an equity analyst at the bank, said in a note to clients Tuesday, “Our work suggests there has been significant interest given COST’s aggressive pricing and high level of customer trust.”
“The accelerating frequency of Reddit posts, quick online sell-outs of product, and COST’s robust monthly eComm sales suggest a sharp uptick in momentum since the launch,” Kelly added, per CNBC.
While the price of nearly 24-karat gold bars is not posted online to nonmembers, analysts believe that Costco offers them at 2 percent above the spot price to its members. There is also a 2% cash-back benefit for executive members and an extra 2% cash-back for Citi card holders. “Pricing at that level and shipping costs suggest it’s a very low-profit business at best,” Kelly added.
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.”