Costco Wholesale Corporation (NASDAQ:COST, ETR:CTO), known for its bulk buys and discounts, is making it simple for its more than 150 million members to invest in physical gold as the yellow metal's price hovers near an all-time high.
The warehouse retailer announced last year it had begun selling one-ounce gold bars, limited to two per customer and priced according to the spot gold price, and has since added other precious metals such as silver coins to its offering.
It is now selling between $100 million and $200 million in gold bars and silver coins per month, according to a Wells Fargo estimate.
“The accelerating frequency of Reddit (NYSE:RDDT) posts, quick online sell-outs of product, and Costco’s robust monthly eComm sales suggests a sharp uptick in momentum since the launch,” the Wells Fargo analysts wrote in a note to clients.
Frank Holmes, CEO of U.S. Global Investors (NASDAQ:GROW), highlighted that Costco has made it easier for individuals to purchase physical gold in what he described as a “very fragmented” market.
“The big go-to site is usually Kitco for people that want to buy gold and get it delivered but all of a sudden it's Costco,” he told Proactive, noting that due to Costco’s previous relationship with American Express, its shoppers tend to have a higher disposable income to purchase higher-value products.
He also pointed to demographic data that showed the gold purchases were predominantly made by Asian women from China and India with a cultural affinity for the metal.
He described that he’d characterized this as the “great love trade,” referring to the fact that gold is a form of “portable wealth” that individuals can use to protect their families.
The popularity of Costco’s gold bar offering comes amid a rally in precious metal prices.
Gold hit a new record price above $2,400 per ounce last week and traded at about $2,385 on Wednesday afternoon.
Holmes highlighted that there has been consistent big buying of gold from central banks since 2010 and now the funnel was getting smaller, coming down to Costco.
Next up could be Walmart Inc (NYSE:WMT, ETR:WMT), he believes.
“Walmart is a huge distributor of cheaper 14-karat gold jewellery,” Holmes highlighted.
He predicts that with gold “going mainstream” and eventually hitting $3,000 per ounce, he expects to see gold and silver coins on the supercenter retailer’s shelves.