Costco may be selling upwards of $200 million worth of gold each month, according to estimates from Wells Fargo.
Last year, The Dallas Express reported that members now have the opportunity to purchase up to two 1-ounce gold bars from the big-box warehouse chain. The launch was so popular that Costco frequently sold out, even with the limit, which has since been raised to five.
Edward Kelly, an equity analyst with Wells Fargo, believes the company’s “aggressive pricing and high level of customer trust” is driving the massive sales.
“The accelerating frequency of Reddit posts, quick on-line sell-outs of product, and COST’s robust monthly eComm sales suggests a sharp uptick in momentum since the launch,” Kelly wrote in a note on Tuesday, per CNBC.
If accurate, the monthly sales would mark a substantial increase from previous periods. In December, Costco CFO Richard Galanti claimed the company “sold over $100 million of gold during the quarter,” per FOX Business. While substantial, this would be dwarfed by recent Wells Fargo estimates.
Kelly believes Costco’s aggressive pricing results in relatively low profit margins. According to CNBC, the retailer sells its nearly pure 24-karat gold for roughly 2% above the precious metal’s spot price. Considering executive members receive 2% back on their purchases, and Citigroup credit card holders obtain a further 2%, the margins are likely paper thin.
Earlier this year, the chain followed the gold rush by expanding its precious metal offering by introducing 99.99% pure silver coins. The coins come in 25-count packages and, like the gold bars, are limited to five orders per membership.
