Costco Gold Bars Sell Out Despite Premium Price: Here’s Why

Costco Gold Bars Sold Out
24-carat Gold Bar for $2,400
2% Cash Back on Purchase

Costco, a well-known warehouse discount store in the U.S., is experiencing explosive popularity for a product that has been selling out for several consecutive days. This product is none other than the gold bars sold at Costco, which were launched in the U.S. last year and quickly sold out.

Costco is expected to generate ten times more revenue this year than last. Surprisingly, these gold bars are sold at 2% more than the market price. Despite the higher price, there’s a reason why they’re consistently sold out.

On the 9th (local time), CNBC reported that, according to Wells Fargo analysts, Costco’s gold bar sales are expected to reach $100 to $200 million per month. Last year, Costco made a trial sale of gold bars, and $100 million worth was sold out in no time. This year, they are significantly expanding this business, with a projected monthly revenue of $200 million.

Analyst Edward Kelly commented on this phenomenon, “Considering Costco’s aggressive pricing policy and the high level of trust from customers, we can expect a noticeable increase in sales volume.”

Currently, Costco is confirmed to be selling 1 ounce (28.3 g) 24-carat gold bars for around $2,400. Considering the price of gold bars traded in the spot market is $2,357 per ounce, customers are speculated to be at a loss immediately upon purchase.

However, those who buy gold bars at Costco do not believe they are at a loss. This is because Costco, a membership discount store, gives Executive members who pay an annual fee of $120 a 2% cashback. Considering the 2% cashback, the gold bars these members buy are different from the general market price.

In addition, Costco offers a dedicated credit card in partnership with Citibank in the United States. This credit card provides a benefit of giving 2% cash points back on payment when used at Costco. Because of this, a significant number of customers who buy gold bars actually acquire them at a lower value than the raw material market and are considered to be profiting.

The reason for buying gold bars is apparent, considering the current skyrocketing gold prices, aside from short-term profit and loss calculations. Considering the start of interest rate cuts, it is estimated that savvy consumers in the U.S. are collecting gold bars as a hedge against inflation.

This is seen as a judgment that comes from the expectation that if the base interest rate, which has currently risen to 5.5%, falls to 4.75% in the second half of the year as the central bank predicts, the asset market will riincreasend the value of money will fall.

Furthermore, it is surmised that for the generations in the U.S. who experienced the aftermath of World War II, gold bars offer a sense of security greater than virtual assets like Bitcoin, which are popular among the younger generation. In fact, for the older generations who believe in what they see, gold is a ‘wealth’ that shows much more value than cash saved in the bank and retirement funds.

In an interview with CNBC, Costco’s Chief Financial Officer Richard Galanti stated, “Since last September, we have been selling 1-ounce gold bars on our website, and the gold bars sell out within hours of being listed.”

Meanwhile, the international gold price has been confirmed to have continued to rise by more than 13% this year.

This is believed to be due to a surge in demand for gold, a representative safe asset, as inflation continues and concerns about the U.S. government’s fiscal deficit increase. According to a Gallup poll, American consumers rated gold as a better investment than stocks or mutual funds last year.

This result, which occurred for the first time in 10 years, shows how fanatical the current demand for gold is. Additionally, the Wall Street Journal (WSJ) reported that not only the older generations but also the younger generations, including millennials, appear to be buying gold as a safe asset in preparation for geopolitical risks, pandemics, natural disasters, financial crises, etc., including the war in Ukraine and the Middle East.

Central banks in China and other Asian countries have been steadily buying gold, and the price of gold is expected to continue rallying.

As of the 9th (local time), the gold price was reported to have hit a record high for eight consecutive trading days. This result can be seen as the expectation of interest rate cuts is heightened amid continuing geopolitical tensions and weaker-than-expected U.S. wholesale prices in March. According to Reuters as of the 11th (local time), gold spot prices are trading at $2,360.52 per ounce, up 1.1%. With this upward forecast, there are speculations that gold could go up to $3,000 per ounce.

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