Costco's Gold Bars Fly Off Shelves Despite Rising Prices, According to Survey
A recent survey reveals that Costco customers are buying the store's 1-ounce gold bars at an impressive rate, despite the record-high prices of the precious metal in recent months.
High Demand for Gold Bars at Costco
The survey found that approximately 77 percent of Costco stores selling bullion bars were out of stock in the first week of October. This survey was conducted by Bloomberg, who checked 101 stores in 46 states that sell and recently restocked gold.
Gold Prices Reach Record Highs
This high sales volume is noteworthy, considering that gold prices have significantly increased over the past year. In the last 12 months, the price of gold has risen by about 41 percent, moving from around $1,864 per ounce to $2,640 per ounce. The American Precious Metals Exchange (APMEX) reports that the spot price for gold reached a record $2,686 per ounce on September 26.
Costco's Venture into Precious Metals
Costco began selling 1-ounce gold bars in late 2023, both in-store and online, exclusively to its members. The company has since expanded its offerings to include silver coins and, more recently, platinum bars and coins. Wells Fargo estimated in April that the retailer is selling up to $200 million in gold per month.
Trust and Aggressive Pricing Drive Sales
Edward Kelly, an analyst with Wells Fargo, suggests that Costco's aggressive pricing and high level of customer trust have sparked significant interest. The rapid sell-outs online and the increasing frequency of Reddit posts discussing Costco's gold offerings indicate a sharp increase in momentum since the launch of these products.
Gold and Silver: A "Meaningful Part" of Costco's Growth
Costco's Chief Financial Officer, Gary Millerchip, told Bloomberg that gold and silver sales have become a "meaningful part" of the company's growth. He expressed satisfaction with Costco's ability to provide these products, stating that it's a great example of their merchants' ability to deliver unique value.
Warnings About Gold Investments
Despite the popularity of gold sales at Costco, the U.S. Commodity Futures Trading Commission (CFTC) has cautioned that gold is not a "safe" investment. They note that gold and other precious metals are highly volatile, and past performance does not guarantee future returns. The CFTC points out that precious metal prices rise with demand, so sellers typically profit when economic anxiety or instability is high.
Costco Expands to Platinum Bars and Coins
Following the success of its gold and silver sales, Costco has begun selling platinum bars and coins. The retail giant recently listed Canadian Platinum Maple Leaf coins and Swiss-made one-ounce platinum bars for $1,089.99 on its website. However, just like its gold and silver offerings, Costco imposes restrictions on the number of bars one can purchase at a time.
Changes in Costco's Membership Fee and Consumer Spending
In July, Costco announced a $5 increase in its annual membership fee, bringing the cost to $65 for "gold star" members and $130 for executive members, effective from September 1. Company executives have also noted a decrease in consumer spending in the most recent quarter.
Bottom Line
The high demand for gold bars at Costco, despite soaring prices, is a fascinating reflection of consumer behavior. It raises questions about the factors driving this trend and the potential implications for both Costco and its customers. What are your thoughts on this development? Feel free to share this article with your friends and engage in the discussion. Don't forget to sign up for the Daily Briefing, which is available every day at 6 pm.
