In an era where conservative financial strategies are paramount, Costco has brilliantly capitalized on the timeless value of gold. The wholesale giant has been generating a staggering monthly revenue of $100 to $200 million through its sales of gold bars, as highlighted by a recent Wells Fargo equity research note. This initiative, launched last October, involves the sale of 1-ounce bars composed of nearly pure 24-karat gold, each priced around $2,000.
Wells Fargo’s analysis applauds Costco’s venture into the gold and silver market as a strategic move that underscores the retailer’s commitment to providing value. However, they note, given the pricing strategy and associated shipping costs, this venture represents a relatively low-margin operation. Despite this, Costco has adeptly priced its gold bars, selling them approximately 2% above the spot prices to its members. This is before accounting for a 2% cashback reward available to executive members and an additional 2% cashback for those using a Citi card.
From its debut until the close of the fiscal quarter on November 26, gold bar sales have contributed roughly $100 million to Costco’s revenues.
Expanding into the Silver Market
Demonstrating its full embrace of precious metals, Costco has also ventured into selling silver coins. These coins, offered in tubes of 25, are nonrefundable and recently included the 1-ounce Canada Maple Leaf Silver Coins, which quickly sold out online at approximately $680 per tube.
Further diversifying its offerings, Costco has made available coins bearing the maple leaf emblem on the front and a silhouette of King Charles III on the reverse, potentially offered at lower prices in local warehouses. Members are permitted to purchase up to five tubes of these coins.
In addition to silver, Costco has listed a 2024 1-ounce Canada Maple Leaf 24-karat gold coin on its website, priced at $2,219.99.
Gold’s Market Performance
The timing of Costco’s foray into the gold market coincides with a notable rise in gold prices, which have surged over 13.70% since the beginning of 2024. As of this Monday morning, the price of gold was trading at $2,349.44 per troy ounce, marking a 0.87% increase from the previous day. Throughout the 24-hour period, gold prices fluctuated between $2,318.90 and $2,365.35 per ounce.
Costco’s successful expansion into gold and silver sales not only diversifies its revenue streams but also aligns with a conservative investment strategy, appealing to those looking to safeguard their wealth against inflation and economic uncertainties.
