Americans Flocking to Costco for Gold: Sales Could Hit $200 Million a Month

Is Costco becoming a major gold seller?

From bulk toilet paper to $200 million in gold bars: Costco's surprising new cash cow is turning heads. The warehouse retailer started selling gold last summer, and now analysts at Wells Fargo estimate monthly sales could be skyrocketing towards $200 million.

Costco's Aggressive Pricing

"Our work suggests there has been significant interest given COST's aggressive pricing and high level of customer trust," said Edward Kelly, an equity analyst at Wells Fargo, in a note to clients. Strong subscriptions to Costco Daily (in-stock alerts), quick online sell-outs, and strong overall sales volume point to a sharp uptick since the launch.

Is it Profitable?

If Kelly's assessment is correct, it's quite a move for a product that debuted last August and brought in about $100 million during Costco's first quarter (which ended in late November 2023). Costco sells one-ounce bars gold bars and coins for about 1% above the spot price – currently around $2,350.

Analysts note that while gold bar sales significantly boost Costco's top line, profit margins are slim due to low premiums and generous cash-back rewards. On top of this competitive pricing, Costco Executive members receive 2% cash back, and those using Citigroup Costco credit cards get an additional 2% back. "It's a very low-profit business at best," Kelly wrote.

Why Gold, Why Now?

Gold has soared 13.5% in 2024, thanks to ongoing inflation fears and uncertainty about the deteriorating US fiscal situation. The government's $2 trillion deficit this year only adds to a national debt exceeding $34.6 trillion.

This makes gold an appealing investment hedge. Geopolitical unrest in the Mideast and Eastern Europe further fuels financial anxieties.