Costco strikes gold with bullion sales

Costco, the retail giant, has tapped into a lucrative market with its gold sales, reportedly generating between $100 million to $200 million US in monthly revenue. According to a recent Wells Fargo equity research note, the company ventured into selling one-ounce bars of nearly pure 24-karat gold last October.

Analysts view this move as strategically sound, bolstering Costco’s value proposition. However, they also note that despite the substantial revenue, the profit margins might be thin due to pricing and shipping costs. Costco appears to have priced its gold appropriately, selling slightly above spot prices to members, with additional benefits such as cash back rewards for executive members and those using a Citi card.

Since its introduction, the gold sales have been brisk, contributing around $100 million in sales within the debut period up to the end of the fiscal quarter ending Nov. 26. Costco’s success with the metal comes as spot prices for gold have risen about 14 per cent since the start of 2024. The warehouse giant has expanded its commitment to the metal market by introducing the sale of silver coins in addition to its gold offerings. Recently, the company began selling tubes of 25 nonrefundable one-ounce Canada Maple Leaf gold and silver one-ounce coins.

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