- Costco now makes between $100 million and $200 million from selling gold
- Because some members get 2 percent cashback, this may not translate into profits
- One-ounce gold bars were around $1,950 in September, but are now $2,370
It is now estimated that Costco sells $200 million worth of gold every month, but did the Americans who bought the gold make a profit?
Those who bought them last year or earlier this year before gold rose in price will have made a profit, according to research from DailyMail.com. Those who bought them recently will have to wait and see.
The wholesaler started offering 1-ounce bars last summer, and executives reported they were flying off the shelves.
In the months since, Costco has embraced the trend, stocking an ever-increasing range of bullion and coins and now sells between $100 million and $200 million worth of gold per month, according to Wells Fargo.
It comes at a time when gold prices continue to surpass record highs, while inflation continues to plague the US economy. This year, spot gold prices have risen more than 13 percent.
Costco now sells $200 million worth of gold every month, a Wells Fargo analyst estimates
Costco’s 1-ounce 24-karat bars cost about $1,950 in September. This week they were around $2,400. Pictured is one of Costco’s 1-ounce gold bars listed on its website in December
When Costco started selling 1-ounce 24-karat bars in September, they cost about $1,949.99. This week they were $2,369.99, although they sold out on Wednesday.
It means the difference in cost between bars sold in September and now is $420. Even since January, when they cost $2,069.99, the bars are $300 more.
This means that owners who bought last year – or even earlier this year – would have a return of several hundred dollars if they sold now.
While owners can’t simply sell them back to Costco at the current price they’re being sold for, they could get about 95 to 98 percent of the current market price if they took them to a precious metals dealer online or in a store. mall.
“Our work suggests there is significant interest given Costco’s aggressive pricing and high level of customer confidence,” Wells Fargo equity analyst Edward Kelly said in a note to clients on Tuesday.
“Costco’s increasing frequency of posts on Reddit, rapid online product sell-out, and robust monthly eComm sales indicate a sharp increase in momentum since launch.”
Its forecasts are significantly higher than revenue, as indicated by executives during a December earnings call.
Costco’s then-CFO Richard Galanti said the company sold about $100 million worth of gold bars in the fiscal quarter ending November 2023.
However, the company has since significantly expanded its range of gold products. In addition to the two gold bars it sold last year, gold coins are also available.
These include the ‘American Eagle Gold Coin’ and ‘American Buffalo Gold Coin’.
Pictured are two new gold products that Costco is selling: the ‘American Eagle Gold Coin’ and ‘American Buffalo Gold Coin’
The retailer has also increased sales limits to five per customer, up from two previously.
Still, according to Kelly, the higher sales don’t necessarily translate into significant profits for Costco.
That’s because it offers executive members 2 percent cash back and another 2 percent for those who use their Citigroup credit cards, Kelly said.
“Prices at that level and shipping costs suggest it is a very low-profit business at best,” he wrote in the note.
Americans looking to invest in gold today have two very different options.
They can buy physical gold, such as Costco’s gold bars, or an exchange-traded fund (ETF), which acts like a stock that tracks the value of gold.
The 1-ounce gold bars were listed on Costco’s website this week for $2,369.99 – marginally higher than the current spot price of $2,347, according to APMEX.
That’s because the retailer must make a small profit, plus the costs of producing and shipping the bars.