Customers Flock to Costco to Buy Gold Bars

Customers Flock to Costco to Buy Gold Bars

Costco's Gold and Silver Sales - Analysis and Trends

Costco's Gold and Silver Sales - Analysis and Trends

Costco may be selling up to $200 million worth of the bars each month, according to a Wells Fargo analysis. The bars sell out quickly, and customers are trading advice online about how to get them.

Alongside its $1.50 hot dog and soda combo, gallon tubs of mayonnaise and value packs of socks, Costco, the warehouse retailer, has been selling gold bars since October.

Now Costco is selling up to $200 million worth of gold and silver each month, according to an analysis from Wells Fargo.

Online forums and Reddit threads have cropped up where customers give one another advice on how to purchase the bars before they sell out.

“I’ve gotten a couple of calls that people have seen online that we’ve been selling one-ounce gold bars, yes, but when we load them on the site, they’re typically gone within a few hours,” Richard Galanti, Costco’s executive vice president and chief financial officer, said in an earnings call in September. Costco started selling gold bars in October.

Costco is now selling one-ounce, 24-karat gold bars, according to its online store. The bars can be purchased only by members, and the price varies based on market rates. As of Thursday, the bars were sold out for members online, but The Wall Street Journal reported that shoppers purchased them for around $2,000 in December.

Inflation F.A.Q.

  1. What is inflation? Inflation is a general increase in prices, which will cause a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
  2. What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
  3. Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
  4. How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
  5. Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.

Costco has also been selling silver coins, advertised as 99.9 percent pure silver, since January, according to an analyst report from Wells Fargo.

People buy gold in times of turmoil. The precious metal has set a series of records as it surged to $2,350 per troy ounce, up roughly $300 since the start of March.

Buying gold becomes more common in times of economic turmoil. Although the U.S. economic outlook has improved and inflation has slowed, it remains higher than the targets from the Federal Reserve, said Sadiq S. Adatia, the chief investment officer for BMO Global Asset Management. And on Wednesday, a key inflation rate was revealed to be stronger than expected.

Investors have said they were puzzled about the rally.

Geopolitical concerns could also be a factor in an increasing interest in gold, Mr. Adatia said. There has been more interest in gold since Ukraine’s currency collapsed after Russia’s invasion, he said.

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For those looking to purchase gold for the first time, Costco provides familiarity and ease, Mr. Adatia said.

“They make it convenient,” he said. “People can physically go in and pick it up and that’s it, versus opening up an account and buying gold shares.”

How much is Costco profiting from this?

Probably not too much.

Given its pricing and shipping costs, it’s likely a “very low-profit business at best,” analysts with Wells Fargo wrote in a note to clients on Tuesday.

Costco sold over $100 million of gold during its first quarter, or the three-month period ending on Sept. 30 last year, Mr. Galanti said on a December earnings call. However, those sales have likely grown since then and may now be running at $100 million to $200 million per month, which could increase its sales figures by 1 percent.

“The reason that we looked at this is that it’s becoming a larger contributor to sales for them,” Edward Kelly, managing director of equity research at Wells Fargo, said. “It’s not that $100 or $200 million a month is a lot for Costco, but it’s new business and they didn’t have that business last year.”

In the three-month period ending on Dec. 31, Costco’s e-commerce sales grew 18 percent compared to the same period a year earlier, driven in part by demand for the precious metals, Mr. 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 highly volatile.

“Like other commodities, precious metal prices rise as demand goes up, so when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers,” the agency said in a statement.

The commission likely puts that warning out to signal that it’s not a guaranteed investment, Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, said. He recommends the average person invest 3 to 5 percent of their assets in gold.

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