FameEX Hot Topics | Costco's Gold Business Thrives: Monthly Sales Estimated Near $200 Million

Wells Fargo estimates that Costco, the giant U.S.-based retail chain, conducts a robust gold trading business, potentially generating between $100 million to $200 million in monthly sales. This surge in sales reflects a growing interest in gold investments fueled by current market conditions and geopolitical tensions.

Costco has become a key player in the gold market, largely due to its competitive pricing and the deep trust it has established with consumers. The retailer offers one-ounce bars of 24-karat gold, which are particularly popular among individual investors. These bars are priced just 2% above the market spot prices, making them an attractive option for those looking to invest in gold.

The demand for gold at Costco is indicative of wider trends in the market. Edward Kelly, a Wells Fargo equity analyst, highlights several factors contributing to this surge, including an increase in related discussions on Reddit, rapid sell-outs of gold bars online, and strong monthly e-commerce sales figures from Costco. These elements suggest a significant uptick in gold sales momentum since the product's launch.

In terms of volume, Costco recently adjusted its purchase limit to five bars per customer, up from the previous limit of two. This change likely reflects the increased demand and Costco's desire to cater to more serious investors while still maintaining control over sales volumes. Despite the high sales volume, the gold business is not necessarily a high-profit endeavor for Costco. Kelly notes that the near-market pricing and discounts offered for certain payment methods mean that the profit margins for Costco's gold sales are quite slim. He explains that the pricing and associated shipping costs indicate that it's "a very low profit business at best."

However, the significant sales figures represent a noticeable demand acceleration for Costco’s gold, which had already generated over $100 million in the first fiscal quarter of 2023. The rising gold prices, which have increased nearly 8% over the last 30 days, also play a crucial role in driving investor interest.

Moreover, it’s not just individual investors who are turning to gold; central banks are also active participants. They continued their buying spree, adding 19 tonnes to their reserves in February alone. This broad-based demand underscores gold's enduring appeal as a safe-haven asset, particularly in times of economic uncertainty. Overall, Costco’s entry into the gold market illustrates its ability to leverage its trusted brand and pricing strategies to meet the diverse needs of its customers, even in the complex realm of investment commodities.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.