Analyst Suggests Costco Selling Hundreds of Millions Worth of Gold Bars Monthly as Price Hits Record High

Costco’s decision to sell gold bars online last year has proven to be a very lucrative move, according to a recent analysis by Wells Fargo analyst Edward Kelly.

In a note issued on April 9, Kelly revealed that the retail giant’s revenue from gold sales could be ranging from $100 million to $200 million per month.

The company began offering one-ounce gold bars at around $2,000 each, with the price fluctuating based on the current market value of gold.

Costco also sells silver, with a tube of 25 coins priced at approximately $675.

While Wells Fargo did not estimate Costco’s silver sales, the bank highlighted the “significant interest” in the retailer’s precious metal products, attributing it to competitive pricing and strong customer trust.

Kelly cited the increasing frequency of Reddit posts, rapid online sell-outs, and robust monthly e-commerce sales as indicators of the growing momentum in Costco’s gold and silver offerings.

However, he also noted that the low premiums on gold bars and the cash back incentives for executive members and Citigroup card users suggest that the business may have very low profit margins.

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Despite the impressive sales figures, the gold and silver offerings appear to have minimal impact on Costco’s overall profits, contributing only about 3 percent to the company’s general merchandise sales. Costco has not publicly commented on the Wells Fargo analysis.

The surge in Costco’s gold sales coincides with record-high gold prices, which have been rising for seven straight sessions due to factors such as central bank purchases and geopolitical tensions.

As of April 9th, 2024, spot gold reached a record high of $2,365.30, and U.S. gold futures rose 0.4 percent to $2,360.70.

Phillip Streible, chief market strategist at Blue Line Futures in Chicago, predicts that the gold market’s technical buying momentum will persist unless the upcoming Consumer Price Index (CPI) data shows significantly higher inflation than expected.

He suggests that a cooler inflation report could push gold prices to $2,400.

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The release of the U.S. Federal Reserve’s policy meeting minutes and the CPI data on April 10 is expected to have a notable impact on gold prices and, in turn, Costco’s sales of the precious metal.