Gold bullion sales rise at Costco. Why?

Besides $1.50 hot dog and soda combos, one-gallon tubs of mayonnaise, and value packs of socks, warehouse retailer Costco has been selling gold bullion since October.

Now, retail analysts say Costco sells as much as $200 million in gold and silver each month, according to an analysis from Wells Fargo.

Online forums and Reddit threads have sprung up where customers give each other advice on how to buy tapes before they sell them.

“I've had several calls that people have seen online saying that we sell one-ounce gold bars, yes, but when we upload them to the site, they're usually gone within a few hours,” Richard Galanti, executive vice president and chief financial officer, said. September earnings call.

Costco began selling gold bullion in October.

Costco now sells one-ounce, 24-karat gold bars, it said Online store. Bars can only be purchased by members, and the price varies based on market prices. As of Thursday, all bars were sold out to members online, however The Wall Street Journal reported Shoppers bought them for about $2,000 in December.

Costco has also been selling silver coins, which are advertised as 99.9 percent pure silver, since January, according to an analyst report from Wells Fargo.

People buy gold in times of turmoil.

The precious metal hit a series of records as it rose to $2,350 an ounce, up nearly $300 since the beginning of March.

Purchasing gold becomes more popular during times of economic turmoil. Although the U.S. economic outlook is improving and inflation is slowing, it is still above the Federal Reserve's targets, said Sadiq Adatia, chief investment officer at BMO Global Asset Management. On Wednesday, it was revealed that headline inflation is stronger than expected.

Investors said they were confused about the rise.

Geopolitical concerns may also be a factor in increased interest in gold, Adatia said. He added that interest in gold has increased since the collapse of the Ukrainian currency after the Russian invasion.

For those looking to buy gold for the first time, Costco offers familiarity and ease, Adatia said.

“They make it comfortable,” he said. “People can actually walk in and pick it up, and that's it, versus opening an account and buying gold stocks.”

How much does Costco profit from this?

Maybe not much.

Given the pricing and shipping costs, it's likely to be a “very low-profit business at best,” Wells Fargo analysts wrote in a note to clients Tuesday.

Galanti said the company sold more than $100 million in gold during the first quarter, or three-month period, ending September 30 of last year. December earnings call. However, these sales have likely grown since then, and may now reach between $100 million to $200 million per month, which could increase its sales numbers by 1 percent.

“The reason we looked at this is because it becomes a bigger contributor to sales for them,” said Edward Kelly, managing director of equity research at Wells Fargo. “It's not that $100 or $200 million a month is a lot of money for Costco, but it's new business and they didn't have that business last year.”

In the three-month period ended Dec. 31, Costco's e-commerce sales increased 18% from the same period a year earlier, partly due to demand for precious metals, Mr. Galanti told investors on an earnings call in March. .

Investing in metals can be volatile.

The Commodity Futures Trading Commission urged caution when buying gold because the precious metal can be highly volatile.

“Like other commodities, precious metal prices rise as demand rises, so when economic anxiety or instability is high, the people who typically benefit from precious metals are sellers.” The agency wrote in a statement.

Larry Tintarelli, chief technical strategist at Blue Chip Daily Trend Report, said the committee would likely put that warning in place to indicate it's not a foolproof investment. The average person is recommended to invest 3 to 5 percent of his assets in gold.