The price of gold continues to soar, but the gold bars at the warehouse-style retail store Costco in the United States are still in short supply, with three-quarters of all Costco stores in America selling out of gold bars.
Costco introduced gold bars in August 2023, and within just a few hours of restocking, they were sold out again. Analysts at Wells Fargo Bank reported in April this year that Costco is selling gold bars worth up to 200 million dollars every month.
In 2024, gold has been one of the best-performing assets in the market, with a return rate of nearly 30%, compared to the S&P 500 index’s return rate of around 21%. Gold has benefited from a series of factors, including Federal Reserve rate cuts, central bank purchases from multiple countries, and geopolitical tensions.
According to a Bloomberg report on October 7th, Sourav Sethia, a 33-year-old analytical engineer from New Jersey, said, “Every time a shipment of gold bars arrives, I receive a call from Costco because I was a previous buyer. So whenever I see the price dip, I rush to Costco to buy one.”
He has purchased two gold bars from Costco in the past four months.
Sethia’s experience reflects a larger trend where shoppers are still buying gold from large retailers despite record-high gold prices.
Although Costco has not disclosed much information about gold sales, a Bloomberg survey showed that the company is struggling to maintain sufficient inventory of gold bars. According to phone surveys of 101 stores in 46 states across the U.S. in the first week of October, approximately 77% of Costco stores had sold out of gold bars. All surveyed stores had received new stock of gold products in recent weeks.
Costco offers various benefits to its members. Premium members (with an annual fee of $130) receive a 2% reward on each purchase; and for those who have a Costco and Citi Visa co-branded card, there is an additional 2% cashback. On September 28th, Costco’s gold bars were priced 1.6% higher than the spot gold price but lower than the pricing offered by precious metal retailers. Therefore, Costco members buying gold bars can get significant discounts.
“This seems like an incredibly good deal,” said Josh Young, a fund manager from Houston, to Bloomberg. He purchased gold bars and coins from Costco last year. He mentioned that buying these items is a hedge against escalating geopolitical and financial risks, including severe stagflation.
“It’s a physical asset, and even without cash flow, gold indeed has a long history of maintaining its value,” he said. “It’s a great personal diversification tool.”
Among other Costco members interviewed by Bloomberg who purchased gold bars, one woman admitted to impulse buying but also considered it a small way to diversify her funds, at least for making jewelry.
Nicky Shiels, the Metal Strategy Director at Geneva’s MKS PAMP SA, told Bloomberg that Costco is a “bright spot” in the consumer gold buying market.
“There is a whole new group of retail buyers,” she said. “We do believe that the trend in the medium to long term is positive because Costco has successfully attracted new buyers to this precious metal field.”
Professionals suggest that Costco’s gold business is likely to remain profitable in the short term.
Ben McMillan, the Chief Information Officer at IDX, told Yahoo Finance at the end of September that after years of “silence,” gold is now in full swing as investors seek to reduce portfolio risks.
“Historically, gold has always been associated with risk aversion and hedging, such as during a hard landing economic recession,” McMillan said.