Last year, Costco made the unusual decision of selling gold bars in its online store, and customers are flooding in to grab a few for themselves.
Golden Decision Pays Off
Last year the retail chain Costco made the unusual marketing move of selling gold bars to their customers. Now, it looks like the decision is paying off in a big way.
Hundreds of Millions
Costco is reportedly making between $100 and $200 million selling 1 oz. gold bars and silver coins to customers, two products they introduced to shoppers in October 2023.
Wells Fargo Equity Report
These estimates come from a recent Wells Fargo equity research note that was released this week. The analysis report described Costco’s business decision as a “smart move” overall.
“A Smart Move”
“We view the addition of gold/silver as a smart move for Costco, as it only reinforces its value position,” the report stated.
“That being said, pricing at that level and shipping costs suggests it’s a very low-profit business at best.”
Members Only
Like all products at Costco, only shoppers who hold a membership account with the retailer are able to purchase gold bars and silver coins.
$2,000 a Piece
These gold bars are sold for $2,000 a piece and can be bought online or in a select number of physical stores. Customers are limited to two bars per purchase.
Immediate Boom in Profit
Between the announcement in September and the end of the fourth quarter of the 2023 fiscal year, these gold bars generated approximately $100 million in sales for Costco in just over a month.
A Very Timely Business Decision
Costco’s timing appeared to be excellent. The price of gold has been continuously uptick, leading to profit for both the retail giant and its savvy customers.
Up More Than 13%
As record-high inflation continues to creep up, the value of gold has been rising alongside it. Gold prices are up more than 13% since the start of 2024, several months after Costco released its shiny new product.
Prices Rise Quickly
When Costco first began selling gold bars in October, their prices were set at $1,950 per ounce. In January, prices rose to $2,069 per piece.
$420 Price Increase
As of April, prices are now set at $2,369.99 on the Costco site, signaling a $420 price increase per item since they were first introduced.
An Unexpected Investment
The whopping value increase has been an unexpected boon for customers who snapped up Costco gold bars and have now made several hundred dollars in returns for each gold bar.
Sold Out Online
With such a significant return on investment, it’s not surprising that these bars have been so popular with Costco members that they have temporarily sold out on multiple occasions.
Gone In 2 Hours
During some periods, Costco gold bars have sold out within as little as 2 hours of being listed online.
Customer Trust and Aggressive Pricing
Wells Fargo analyst Edward Kelly also noted the “sharp uptick” in customer interest. “Our work suggests there has been significant interest given Costco’s aggressive pricing and high level of customer trust,” he wrote.
“A Sharp Uptick In Momentum”
“The accelerating frequency of Reddit posts, quick online sell-outs of product, and Costco’s robust monthly eComm sales suggest a sharp uptick in momentum since the launch,” he continued.
95% On the Market
While gold-purchasing Costco members cannot sell their gold bars back to Costco for a profit, they can sell them to precious metal dealers for approximately 95-98% of the current market price.
Costco Broadens Their Product Range
Given the increasing value of gold and its popularity with members, Costco has increased the amount it sells and its precious metal offerings in general.
Gold and Silver Coins
They are now selling gold and silver coins, offering another option for shoppers who still want to join the trend. These include the ‘American Eagle Gold Coin,’ ‘American Buffalo Gold Coin,’ and ‘Canada Maple Leaf Silver Coin.’
$680 for 25 Coins
The Canada Maple silver coins are sold in tubes of 25 coins at a price of $680 per roll.
The post Costco’s Golden Gamble: Selling Gold Bars Rakes in Millions first appeared on Wealthy Living.
Featured Image Credit: Shutterstock / Yee Hui Lau.
The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
