Costco mentioned precious metals only briefly once in its most recent earnings call, reaffirming that analysts were on to something after pointing to strong demand for the company's gold bars and silver coins this spring.
“E-commerce sales growth in the third quarter was driven by gold and silver bullion, gift cards and consumer electronics,” Costco Chief Financial Officer Gary Millerchip told investors on Thursday after the company reported a 20.7% increase in online sales in the third quarter. He declined to provide further details, and Costco did not respond to a request for comment on Friday.
Researchers at Wells Fargo estimated in early April that the membership retailer could be raking in $100 million to $200 million in sales each month since introducing the product late last summer. By December, Costco said it had already sold more than $100 million worth of gold bars during the quarter, sometimes selling out in just a few hours.
Even those levels are a tiny fraction of the company's third-quarter net sales of more than $57 billion, and analysts say profit margins from the gold and silver offerings are probably slim.
Still, the gold rush is the latest sign that some consumers remain eager to make safe investments amid widespread uncertainty amid a robust economy.
“Gold has traditionally been a kind of fear trade,” said Lee Baker, founder of planning firm Apex Financial Services and president of the Georgia chapter of AARP. “We're in a pretty good place economically, but that's at odds with the emotional anxiety that a lot of people are feeling.”
Fears driven by everything from inflation to geopolitical tensions have helped drive gold prices to record highs, rising from $2,100 an ounce in early March to $2,450 in May. Precious metals such as gold and silver are sometimes seen as “safe havens” against inflation and stock market fluctuations. But precious metals also have a downside.
“I haven't had a single client ask me about buying gold,” Baker acknowledged, but he added that anyone considering buying gold should ask themselves whether they're willing to monitor the price regularly to know when to sell.
“It's helpful to have a specific target for stock price growth,” he said. For example, “that might be a catalyst for saying, 'OK, the election is over. It's OK. There were no riots across the country.'”
Unlike other assets, precious metals do not generate cash flow through yield or interest. Storing gold or silver at home usually involves some cost: it needs to be insured and kept in a safe place such as a vault.
In any case, “commodities are already part of a portfolio of many other investments,” Baker said. “It's easy to invest in gold through an ETF or something like that,” he said, referring to commonly held exchange-traded funds.
