Costco Wholesale Corp., known for its bulk groceries and famously cheap hot dogs, has become an unexpected player in the precious metals market. In a surprising turn, the retailer’s 1-ounce gold bars are flying off the shelves, even as gold prices soar to record highs. This newfound demand underscores the appeal of gold in uncertain economic times.
Gold Bars Selling Out at Record Speeds
In June 2023, Costco began offering 1-ounce, 24-karat gold bars in stores and online. These Swiss-made bars, which are roughly the size of a small chocolate bar, have become a hot commodity. A Bloomberg survey of 101 stores across 46 states found that 77% of locations were sold out by early October, despite recent restocking efforts.
Gold prices have surged nearly 30% in 2024, reaching over $2,600 an ounce in September, yet Costco’s gold bars—currently priced at $2,699.99—continue to sell out within hours of being listed. Back in October 2023, the bars sold for just under $2,000 when gold was valued closer to $1,830 per ounce. Costco’s Chief Financial Officer Richard Galanti acknowledged the rush during a recent earnings call, noting that the bars “typically [disappear] within a few hours” of appearing online.
Why the Sudden Demand for Gold?
The surge in demand for gold at Costco comes at a time of heightened economic anxiety. Historically, gold has been seen as a safe haven for investors looking to protect their wealth from inflation, currency fluctuations, and market volatility. David Wagner III, head of markets and equities at Aptus Capital Advisors, points out that when people rush to buy gold, it signals concerns about “instability at the structural level of the market and/or the government itself.”
Though gold is often seen as a hedge against economic threats, the Commodity Futures Trading Commission (CFTC) warns that precious metals are not without risk. According to the CFTC, rising demand during times of instability often benefits the sellers more than buyers.
Costco’s Gold Success Amid Broader Market Declines
Costco’s foray into gold sales has been immensely successful, contrasting with declining sales trends for gold in other parts of the U.S. market. According to U.S. Mint data, American Eagle gold coin sales—a common benchmark for retail gold demand—dropped by 64% in the first nine months of 2024 compared to the previous year.
During a September 2023 earnings call, Costco revealed that gold bars were selling out so quickly that they had to limit customers to two bars each. By December 2023, the retailer reported over $100 million in gold bar sales for the fiscal first quarter, marking a significant win for its e-commerce growth.
Costco’s ability to offer gold at a lower premium than traditional precious metals dealers has also made it an attractive option for buyers. Additionally, Costco members using the Costco Citi card earn 2% back on their purchase, while executive members get another 2% in rewards, making gold bars an even more appealing investment.
A New Demographic of Gold Buyers
Costco’s gold offerings are drawing in a new demographic of investors, many of whom may not have previously considered buying precious metals. Nicky Shiels, head of metals strategy at MKS PAMP SA, described Costco as a “bright spot” in the consumer gold-buying market. The company’s reach has even extended to social media platforms like TikTok, where users like “midlifecrisisgirl” have shared their Costco gold purchases with thousands of followers.
One Reddit user humorously shared a photo of a recently purchased gold bar alongside a remark about Costco’s irresistibility: “Go for the $5 chicken and $1.50 hot dog, leave with a gold bar.”
Expanding Precious Metals Offerings
Encouraged by the success of its gold bars, Costco recently announced that it would expand its precious metals offerings to include platinum bars. This diversification reflects the company’s strategy of adapting to customer demand and exploring new revenue streams. Though detailed sales figures for these additional offerings have not been disclosed, Costco’s Chief Financial Officer Gary Millerchip confirmed that precious metal sales remain a significant contributor to e-commerce growth.
The Allure of Costco’s Gold Bars
Despite concerns about the risks of investing in precious metals, Costco’s ability to tap into the gold market has proven to be a masterstroke. The combination of competitive pricing, membership perks, and the retailer’s widespread reputation for value has turned its gold bars into a must-have item for many of its loyal shoppers.
As of early October, Costco’s gold bars remain out of stock online, though the company continues to replenish inventory. For some customers, the thrill of getting their hands on a gold bar has become part of the shopping experience. One customer, Sourav Sethia, explained to Bloomberg that he rushes to Costco whenever he sees the price of gold pull back, ensuring he doesn’t miss the chance to buy another bar.
Final Thoughts on Costco's Golden Strategy
Costco’s success in selling gold bars is a striking example of the retailer’s ability to pivot and capitalize on changing consumer interests. As gold prices continue to soar and economic uncertainty looms, Costco’s entry into the precious metals market could have long-term implications for both the retail and investment sectors. Whether it’s for portfolio diversification or simply the novelty of buying bullion at a warehouse store, Costco’s customers are clearly embracing the golden opportunity.
Catherine
