Costco is raking in millions of dollars on a monthly basis from its new gold sales strategy. The retail giant started selling 1-ounce gold bars priced at $2,000 online and at select stores last year. Calling Costco's sale of gold bars a “smart move,” experts estimate that the retail company is earning $100 to $200 million a month. The Wells Fargo equity research report further adds that the “addition of gold/silver” to its sales offerings “only reinforces its value position.”
Experts laud Costco's new gold sales strategy
When Costco first started selling gold in October 2023, CFO Richard Galanti said during a company earnings call that bars being sold online were “typically gone within a few hours,” per the Associated Press. At the time, the company limited the sale to two bars per buyer. However, a buyer can now purchase a maximum of 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 on-line sell-outs of product, and COST’s robust monthly eComm sales suggests a sharp uptick in momentum since the launch,” Kelly added, per CNBC.
While the price of nearly 24-karat gold bars is not disclosed online to nonmembers, experts estimate that Costco generally sells them at 2 per cent above the spot price to its members. There is also a 2 per cent cash-back reward for executive members and an additional 2 per cent cash-back for Citi card holders. “Pricing at that level and shipping costs suggests it’s a very low-profit business at best,” Kelly added.
{{/usCountry}}While the price of nearly 24-karat gold bars is not disclosed online to nonmembers, experts estimate that Costco generally sells them at 2 per cent above the spot price to its members. There is also a 2 per cent cash-back reward for executive members and an additional 2 per cent cash-back for Citi card holders. “Pricing at that level and shipping costs suggests it’s a very low-profit business at best,” Kelly added.
{{/usCountry}}DataTrek co-founder Nicholas Colas said in a recent market note, “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.” “The only good news is that this reinforces the idea of gold as a reasonable hedge for diversified portfolios.”