(Bloomberg) — Gold’s breathtaking surge this year to repeated record highs hasn’t stopped bullion from flying off shelves at Costco Wholesale Corp. (COST) stores across the US.
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Costco’s one-stop shopping convenience is bringing gold (GC=F) buying to the masses by offering prices that undercut traditional precious metals dealers and extra rewards for its most loyal customers. Add to that gold’s appeal as a safe haven and hedge against inflation, and it’s easy to see why bullion buyers are turning to the warehouse retailer.
“It’s a great experience overall,” said Sourav Sethia, a 33-year-old analytics engineer from New Jersey. “I get calls from Costco whenever gold bars arrive as I am a previous buyer. So whenever I see the price has pulled back, I rush to Costco to buy one.”
Sethia visited his local Costco with his parents on Sept. 28 while the store was promoting one ounce gold bars stamped to mark the Indian festival Diwali. A Costco greeter clutching a laminated paper sheet advertising the item was directing shoppers to the center of the store, where the gold is displayed in a glass case. A small sign showed the price — $2,699.99. While Sethia didn’t buy this time, he did purchase two bars at this location in the past four months to guard against inflation.
Sethia’s experience is reflective of a larger trend that’s driving shoppers to seek out gold at the big-box store even as prices of the precious metal hit all-time highs. While the retailer doesn’t disclose much about its gold sales, a Bloomberg survey revealed how hard it is for the company to keep shelves stocked with the precious metal. About 77% of surveyed Costco outlets that stock bullion bars were sold out in the first week of October, based on calls to 101 stores in 46 states — all the stores surveyed had received fresh stock of the gold products in recent weeks.
Spot gold has jumped nearly 30% this year, successively hitting record highs. Its ferocious rally makes it not only one of the best-performing commodities, but also means that metal has outperformed US equities and bonds. The surge has been driven by its appeal as a haven asset in times of geopolitical and economic uncertainty and its role as diversification play to safeguard wealth. It surpassed $2,600 an ounce last month, bolstered by the Federal Reserve’s shift to interest-rate cuts. Non-yielding gold tends to rise in a low-rate environment.
A flurry of buying from Costco is happening amid signs elsewhere that cash-strapped Americans are cashing in on gold’s rally. New York’s pawn shops and jewelers have seen a flood of sellers. Sales of American Eagle gold coins — a proxy for retail buying — tumbled 64% in the January-September period from a year earlier, according to US Mint data.
Costco is the “one bright spot” in the consumer gold-buying market, said Nicky Shiels, head of metals strategy at Geneva-based MKS PAMP SA.
“There’s a whole new cohort of retail buyers,” she said. “We do think that’s positive in the medium to long term, given the fact that Costco has managed to bring in new buyers into the precious space.”
Costco started selling bullion in June 2023 in US stores and on its website. The Swiss-made 24 karat bars are small — about the size of those mini chocolate bars handed out on Halloween, but not as thick — and encased in cardboard-and-plastic packaging. While the retailer doesn’t disclose how much it sells, the buzz created by shoppers in person and on the Internet offers a snapshot of its popularity.
Costco customers, who pay membership fees, tend to have higher household incomes than those frequenting other retail chains. Those buying gold seem to be wooed by the ease of dealing with a big-box outlet to collect the longstanding store of wealth. Johnny Lee, a 40-year-old content creator from Los Angeles, bought gold bars from Costco twice in the past year: once for gifts and a second time “just for the excitement of it.”
“It’s easy to make a purchase knowing that there has been historical value in it,” Lee said, adding that he suspects many Costco shoppers are getting swept up by a trend. “I feel like people buying gold bars at Costco is kind of a symbol of how little folks know about buying gold in general.”
In a rare public comment about its bullion, Costco executives noted the popularity of its gold offerings during a September 2023 earnings call. In its fiscal first quarter, the company said it sold more than $100 million in gold bars — equal to about 51,740 ounces, based on calculations using average gold prices during that period.
Gold and silver sales continue to be “a meaningful part” of e-commerce sales growth, Chief Financial Officer Gary Millerchip said by email to Bloomberg.
“We are glad to be able to offer gold and silver items for our members,” he said. “It’s a great example of our merchants constantly finding new ways to deliver uniqueness and value.”
There are benefits buying from Costco. The retailer offers 2% cash rewards for using an affiliated Citi (C) credit card on purchases at Costco. Shoppers also get a 2% reward on purchases with an executive membership, which costs $130 a year. Costco was selling one ounce bullion bars on Sept. 28 for a 1.6% premium to spot gold’s price — below what precious metals retailers charge. Add a potential 4% in rewards, and Costco members get an even bigger break.
“It seemed like a too-good-to-be-true deal,” said Josh Young, who purchased a gold bar and coin from Costco in the past year. The Houston money manager said he purchased the items as insurance against rising geopolitical and financial risks, including “significant hyperinflation.”
“It’s physical and gold does have a long history of being a store of value even though there’s no cash flow from it,” Young, 41, said. “It’s a good personal diversifier.”
Costco’s precious-metals foray is well-documented online. Reddit forums share tips on which stores have inventory. Those who score show off their bounty on YouTube and swap stories on social media. California’s Angel Groff snapped up two gold bars from Costco last year for about $1,950 each, recording the online purchase for the 40,000 fans of her “midlifecrisisgirl” TikTok account.
“I bought it impulsively,” said the 42—year-old, who usually posts about jewelry and Hermes bags. “What’s the worst-case scenario? It’s a small way to diversify funds and if it goes well, it goes well. If it doesn’t, I can make jewelry out of it.”
Some followers called it a dumb move. Today, each bar is worth about $700 more.
Signs of robust bullion demand at Costco won’t move prices because sales volumes aren’t large enough, according to Philip Newman, managing director at consultancy Metals Focus.
Still, the buying can signal strong support for the metal.
“People discount retail activity because there’s an arrogance that thinks that retail is ‘dumb buying’ — I don’t agree with that,” said Matt Schwab of Greenwich, Connecticut-based hedge fund Quantix Commodities. Costco gold buying “can provide a form of constant support, akin to central bank buying.”
Costco’s offerings make gold ownership more accessible than ever, said Stefan Gleason, CEO of Money Metals Exchange, one of the top US precious metal retailers. He estimates that, outside of jewelry, less than 2% of Americans own gold and silver.
“Even an increase to 5% to 10% ownership would be dramatic — and would likely disrupt the market,” he said.
—With assistance from Yiqin Shen.
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