Costco, known for its wide range of wholesale goods, has made a significant entry into the gold market.
Richard Galanti, Costco’s Chief Financial Officer, revealed in an earnings call on December 14 that the company sold over $100 million worth of gold in the quarter that ended on September 30.
This quarter marked the beginning of fiscal 2024 for Costco.
The Surge in Gold Bar Sales
The wholesale giant started offering gold bars online in September. Galanti, during an earnings call later that month, emphasized the remarkable customer response to this new venture.
“You’ve probably read about the fact that we’re selling one-ounce gold bars. We sold over $100 million of gold during the quarter [that ended Sept. 30],” he said.
He also mentioned the rapid pace at which these gold bars are selling: “When we load [gold bars] on the site, they’re typically gone within a few hours.”
Product Availability and Membership Requirements
Costco’s online store currently lists two types of one-ounce gold bars: the PAMP Suisse Lady Fortuna Veriscan and the Gold Bar Rand Refinery, both 24-karat gold.
These items are available exclusively to Costco members, with a limit of two bars per member.
The retailer offers three membership types: Gold Star and Business memberships for $60 a year, and Executive membership for $120 a year.
Pricing and Sales Details
As of December 15, as reported by CNBC, the gold bars were priced at $2,069.99, which was about $50 more than the spot gold price of $2,020.58.
The gold bars, once purchased, are non-returnable and non-refundable and are delivered to customers across the United States within two to five days via UPS.
Costco’s Financial Growth and Gold Market Dynamics
These impressive sales figures come as Costco continues to report strong profits, with its shares surging this year.
As of the morning of December 18, Costco’s shares have increased by more than 45 percent year to date.
Concurrently, gold prices have also risen, jumping from around $1,797 per ounce to $1,984, an increase of more than 10 percent.
Global Economic Factors Influencing Gold Prices
The spot gold price reached an all-time intraday high of $2,152 earlier this month and has been expected to remain elevated into the next year.
Analysts attribute this to geopolitical uncertainty, potential Federal Reserve rate cuts, and a weakening U.S. dollar. The ongoing Israel–Hamas conflict has also played a role in boosting gold’s safe-haven appeal.
Experts like Heng Koon How, head of markets strategy at UOB, foresee a positive outlook for gold.
“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” How told CNBC.
He expects gold prices to reach up to $2,200 per ounce by the end of next year.
Nicky Shiels, head of metals strategy at MKS PAMP, also shared a bullish view, saying,
“There is simply less leverage this time around vs. 2011 in gold … taking prices through $2,100 and putting $2,200/oz. in view.”
Central Banks’ Influence on the Gold Market
Significant central bank gold buying is another factor driving gold prices.
According to the World Gold Council (WGC), global central banks bought an astonishing 800 tons of gold in the first three quarters of 2023, a 14 percent increase compared to the same period last year.
The People’s Bank of China has been particularly active, increasing its gold reserves substantially.
Fed Rates and Market Dynamics
The outlook for gold in the coming year remains positive, with safe-haven demand and U.S. interest rate projections playing a significant role.
A report by ING suggests that the anticipated Fed policy will be a key determinant for gold prices.
The report notes, “Higher rates are typically negative for gold, which doesn’t offer any interest.”
Looking ahead, the resurgence in gold ETFs and increasing investor interest are expected to further influence the gold market, suggesting a continuation of the upward trend in gold prices.